Correlation Between IShares Infrastructure and IShares Environmental

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

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

Diversification Opportunities for IShares Infrastructure and IShares Environmental

0.61

Correlation Coefficient

IShares Infrastructure  IShares Environmental

Poor diversification

The 3 months correlation between IShares and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares Infrastructure ETF and iShares Environmental Infrastr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Environmental and IShares Infrastructure 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 Infrastructure ETF are associated (or correlated) with IShares Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Environmental has no effect on the direction of IShares Infrastructure i.e., IShares Infrastructure and IShares Environmental go up and down completely randomly.

Pair Corralation between IShares Infrastructure and IShares Environmental

Given the investment horizon of 90 days iShares Infrastructure ETF is expected to generate 1.24 times more return on investment than IShares Environmental. However, IShares Infrastructure is 1.24 times more volatile than iShares Environmental Infrastructure. It trades about 0.06 of its potential returns per unit of risk. iShares Environmental Infrastructure is currently generating about 0.0 per unit of risk. If you would invest  4,183  in iShares Infrastructure ETF on October 13, 2024 and sell it today you would earn a total of  349.00  from holding iShares Infrastructure ETF or generate 8.34% return on investment over 90 days.

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

iShares Infrastructure ETF  vs.  iShares Environmental Infrastr

iShares Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Environmental Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Infrastructure and IShares Environmental

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

The idea behind iShares Infrastructure ETF and iShares Environmental Infrastructure 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 Transaction History module to view history of all your transactions and understand their impact on performance.