Correlation Between IShares Fundamental and DRI Healthcare

Can any of the company-specific risk be diversified away by investing in both IShares Fundamental and DRI Healthcare 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 IShares Fundamental and DRI Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Fundamental Hedged and DRI Healthcare Trust, you can compare the effects of market volatilities on IShares Fundamental and DRI Healthcare 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 IShares Fundamental with a short position of DRI Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and DRI Healthcare.

Diversification Opportunities for IShares Fundamental and DRI Healthcare

-0.32

Correlation Coefficient

IShares Fundamental  DRI Healthcare

Very good diversification

The 3 months correlation between IShares and DRI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and DRI Healthcare Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRI Healthcare Trust and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with DRI Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRI Healthcare Trust has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and DRI Healthcare go up and down completely randomly.

Pair Corralation between IShares Fundamental and DRI Healthcare

Assuming the 90 days trading horizon IShares Fundamental is expected to generate 2.07 times less return on investment than DRI Healthcare. But when comparing it to its historical volatility, iShares Fundamental Hedged is 3.5 times less risky than DRI Healthcare. It trades about 0.09 of its potential returns per unit of risk. DRI Healthcare Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  548.00  in DRI Healthcare Trust on September 17, 2024 and sell it today you would earn a total of  307.00  from holding DRI Healthcare Trust or generate 56.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

iShares Fundamental Hedged  vs.  DRI Healthcare Trust

iShares Fundamental

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

DRI Healthcare Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DRI Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DRI Healthcare is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Fundamental and DRI Healthcare

The main advantage of trading using opposite IShares Fundamental and DRI Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fundamental position performs unexpectedly, DRI Healthcare 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 DRI Healthcare will offset losses from the drop in DRI Healthcare's long position.

The idea behind iShares Fundamental Hedged and DRI Healthcare Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.