Correlation Between IShares Expanded and IShares Telecommunicatio

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

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

Diversification Opportunities for IShares Expanded and IShares Telecommunicatio

0.38

Correlation Coefficient

IShares Expanded  IShares Telecommunicatio

Weak diversification

The 3 months correlation between IShares and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech and iShares Telecommunications ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Telecommunicatio and IShares Expanded 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 Expanded Tech are associated (or correlated) with IShares Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Telecommunicatio has no effect on the direction of IShares Expanded i.e., IShares Expanded and IShares Telecommunicatio go up and down completely randomly.

Pair Corralation between IShares Expanded and IShares Telecommunicatio

Considering the 90-day investment horizon iShares Expanded Tech is expected to under-perform the IShares Telecommunicatio. In addition to that, IShares Expanded is 1.66 times more volatile than iShares Telecommunications ETF. It trades about -0.08 of its total potential returns per unit of risk. iShares Telecommunications ETF is currently generating about 0.03 per unit of volatility. If you would invest  2,673  in iShares Telecommunications ETF on December 19, 2024 and sell it today you would earn a total of  40.50  from holding iShares Telecommunications ETF or generate 1.52% return on investment over 90 days.

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

iShares Expanded Tech  vs.  iShares Telecommunications ETF

iShares Expanded Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Expanded Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

IShares Telecommunicatio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Telecommunicatio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Expanded and IShares Telecommunicatio

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

The idea behind iShares Expanded Tech and iShares Telecommunications ETF 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.