Correlation Between Industrial Select and IShares Self
Can any of the company-specific risk be diversified away by investing in both Industrial Select and IShares Self at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Industrial Select and IShares Self into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and iShares Self Driving EV, you can compare the effects of market volatilities on Industrial Select and IShares Self and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Industrial Select with a short position of IShares Self. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and IShares Self.
Diversification Opportunities for Industrial Select and IShares Self
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Industrial and IShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and iShares Self Driving EV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Self Driving and Industrial Select is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Industrial Select Sector are associated (or correlated) with IShares Self. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Self Driving has no effect on the direction of Industrial Select i.e., Industrial Select and IShares Self go up and down completely randomly.
Pair Corralation between Industrial Select and IShares Self
Considering the 90-day investment horizon Industrial Select Sector is expected to generate 0.52 times more return on investment than IShares Self. However, Industrial Select Sector is 1.91 times less risky than IShares Self. It trades about 0.09 of its potential returns per unit of risk. iShares Self Driving EV is currently generating about -0.02 per unit of risk. If you would invest 9,795 in Industrial Select Sector on September 3, 2024 and sell it today you would earn a total of 4,604 from holding Industrial Select Sector or generate 47.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. iShares Self Driving EV
Performance |
| Timeline |
| Industrial Select Sector |
| iShares Self Driving |
Industrial Select and IShares Self Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and IShares Self
The main advantage of trading using opposite Industrial Select and IShares Self positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select position performs unexpectedly, IShares Self can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Self will offset losses from the drop in IShares Self's long position.| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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