Correlation Between Ishares Trust and Technology Select

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

By analyzing existing cross correlation between Ishares Trust and Technology Select Sector, you can compare the effects of market volatilities on Ishares Trust and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Trust and Technology Select.

Diversification Opportunities for Ishares Trust and Technology Select

0.92

Correlation Coefficient

Ishares Trust  Technology Select

Almost no diversification

The 3 months correlation between Ishares and Technology is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of Ishares Trust i.e., Ishares Trust and Technology Select go up and down completely randomly.

Pair Corralation between Ishares Trust and Technology Select

Given the investment horizon of 90 days Ishares Trust is expected to generate 1.03 times more return on investment than Technology Select. However, Ishares Trust is 1.03 times more volatile than Technology Select Sector. It trades about 0.1 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.08 per unit of risk. If you would invest  3,091  in Ishares Trust on September 24, 2024 and sell it today you would earn a total of  223.20  from holding Ishares Trust or generate 7.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Ishares Trust   vs.  Technology Select Sector

Ishares Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ishares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Technology Select Sector

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Ishares Trust and Technology Select

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

The idea behind Ishares Trust and Technology Select Sector 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.