Correlation Between IShares Expanded and IShares Medical

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

By analyzing existing cross correlation between iShares Expanded Tech Software and iShares Medical Devices, you can compare the effects of market volatilities on IShares Expanded and IShares Medical 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 Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Expanded and IShares Medical.

Diversification Opportunities for IShares Expanded and IShares Medical

0.24

Correlation Coefficient

IShares Expanded  IShares Medical

Modest diversification

The 3 months correlation between IShares and IShares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and iShares Medical Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Medical Devices 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 Software are associated (or correlated) with IShares Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Medical Devices has no effect on the direction of IShares Expanded i.e., IShares Expanded and IShares Medical go up and down completely randomly.

Pair Corralation between IShares Expanded and IShares Medical

Considering the 90-day investment horizon IShares Expanded is expected to generate 1.63 times less return on investment than IShares Medical. In addition to that, IShares Expanded is 1.72 times more volatile than iShares Medical Devices. It trades about 0.05 of its total potential returns per unit of risk. iShares Medical Devices is currently generating about 0.15 per unit of volatility. If you would invest  5,985  in iShares Medical Devices on November 19, 2024 and sell it today you would earn a total of  450.00  from holding iShares Medical Devices or generate 7.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

iShares Expanded Tech Software  vs.  iShares Medical Devices

iShares Expanded Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, IShares Expanded is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Medical Devices

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Medical Devices are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, IShares Medical may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with IShares Expanded and IShares Medical

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

The idea behind iShares Expanded Tech Software and iShares Medical Devices 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.