Correlation Between IShares Trust and Controladora Vuela

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

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

Diversification Opportunities for IShares Trust and Controladora Vuela

0.51

Correlation Coefficient

IShares Trust  Controladora Vuela

Very weak diversification

The 3 months correlation between IShares and Controladora is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Controladora Vuela Compaa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Controladora Vuela Compaa and IShares Trust 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 Trust are associated (or correlated) with Controladora Vuela. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Controladora Vuela Compaa has no effect on the direction of IShares Trust i.e., IShares Trust and Controladora Vuela go up and down completely randomly.

Pair Corralation between IShares Trust and Controladora Vuela

Assuming the 90 days trading horizon IShares Trust is expected to generate 8.21 times less return on investment than Controladora Vuela. But when comparing it to its historical volatility, iShares Trust is 2.02 times less risky than Controladora Vuela. It trades about 0.05 of its potential returns per unit of risk. Controladora Vuela Compaa is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,294  in Controladora Vuela Compaa on September 17, 2024 and sell it today you would earn a total of  395.00  from holding Controladora Vuela Compaa or generate 30.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

iShares Trust   vs.  Controladora Vuela Compaa

iShares Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, IShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Controladora Vuela Compaa

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Controladora Vuela Compaa are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Controladora Vuela sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Controladora Vuela

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

The idea behind iShares Trust and Controladora Vuela Compaa 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.