Correlation Between IShares Insurance and IShares Broker

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

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

Diversification Opportunities for IShares Insurance and IShares Broker

0.45

Correlation Coefficient

IShares Insurance  IShares Broker

Very weak diversification

The 3 months correlation between IShares and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Insurance ETF and iShares Broker Dealers Securit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Broker Dealers and IShares Insurance 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 Insurance ETF are associated (or correlated) with IShares Broker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Broker Dealers has no effect on the direction of IShares Insurance i.e., IShares Insurance and IShares Broker go up and down completely randomly.

Pair Corralation between IShares Insurance and IShares Broker

Considering the 90-day investment horizon iShares Insurance ETF is expected to under-perform the IShares Broker. But the etf apears to be less risky and, when comparing its historical volatility, iShares Insurance ETF is 1.1 times less risky than IShares Broker. The etf trades about -0.06 of its potential returns per unit of risk. The iShares Broker Dealers Securities is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,297  in iShares Broker Dealers Securities on November 28, 2024 and sell it today you would lose (302.00) from holding iShares Broker Dealers Securities or give up 1.97% of portfolio value over 90 days.

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

iShares Insurance ETF  vs.  iShares Broker Dealers Securit

iShares Insurance ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Insurance ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Insurance is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

iShares Broker Dealers

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Broker Dealers Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Broker is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Insurance and IShares Broker

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

The idea behind iShares Insurance ETF and iShares Broker Dealers Securities 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.