Correlation Between IShares Expanded and Defiance Quantum

Can any of the company-specific risk be diversified away by investing in both IShares Expanded and Defiance Quantum 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 Defiance Quantum 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 Defiance Quantum ETF, you can compare the effects of market volatilities on IShares Expanded and Defiance Quantum 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 Defiance Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Expanded and Defiance Quantum.

Diversification Opportunities for IShares Expanded and Defiance Quantum

0.89

Correlation Coefficient

IShares Expanded  Defiance Quantum

Very poor diversification

The 3 months correlation between IShares and Defiance is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Defiance Quantum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Quantum ETF 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 Defiance Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Quantum ETF has no effect on the direction of IShares Expanded i.e., IShares Expanded and Defiance Quantum go up and down completely randomly.

Pair Corralation between IShares Expanded and Defiance Quantum

Considering the 90-day investment horizon IShares Expanded is expected to generate 4.07 times less return on investment than Defiance Quantum. But when comparing it to its historical volatility, iShares Expanded Tech Software is 1.28 times less risky than Defiance Quantum. It trades about 0.16 of its potential returns per unit of risk. Defiance Quantum ETF is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  6,439  in Defiance Quantum ETF on September 17, 2024 and sell it today you would earn a total of  1,325  from holding Defiance Quantum ETF or generate 20.58% return on investment over 90 days.

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

iShares Expanded Tech Software  vs.  Defiance Quantum ETF

iShares Expanded Tech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, IShares Expanded showed solid returns over the last few months and may actually be approaching a breakup point.

Defiance Quantum ETF

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Defiance Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Expanded and Defiance Quantum

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

The idea behind iShares Expanded Tech Software and Defiance Quantum 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.