Correlation Between IShares Oil and IShares Oil

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

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

Diversification Opportunities for IShares Oil and IShares Oil

0.94

Correlation Coefficient

IShares Oil  IShares Oil

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Gas and iShares Oil Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Oil Equipment and IShares Oil 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 Oil Gas are associated (or correlated) with IShares Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Oil Equipment has no effect on the direction of IShares Oil i.e., IShares Oil and IShares Oil go up and down completely randomly.

Pair Corralation between IShares Oil and IShares Oil

Considering the 90-day investment horizon iShares Oil Gas is expected to under-perform the IShares Oil. But the etf apears to be less risky and, when comparing its historical volatility, iShares Oil Gas is 1.34 times less risky than IShares Oil. The etf trades about -0.04 of its potential returns per unit of risk. The iShares Oil Equipment is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,087  in iShares Oil Equipment on October 10, 2024 and sell it today you would lose (15.00) from holding iShares Oil Equipment or give up 0.72% of portfolio value over 90 days.

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

iShares Oil Gas  vs.  iShares Oil Equipment

iShares Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, IShares Oil is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares Oil Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Oil Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, IShares Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Oil and IShares Oil

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

The idea behind iShares Oil Gas and iShares Oil Equipment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.