Correlation Between IShares Healthcare and IQ Healthy

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

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

Diversification Opportunities for IShares Healthcare and IQ Healthy

0.79

Correlation Coefficient

IShares Healthcare  IQ Healthy

Poor diversification

The 3 months correlation between IShares and HART is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare Providers and IQ Healthy Hearts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Healthy Hearts and IShares Healthcare 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 Healthcare Providers are associated (or correlated) with IQ Healthy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Healthy Hearts has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and IQ Healthy go up and down completely randomly.

Pair Corralation between IShares Healthcare and IQ Healthy

Considering the 90-day investment horizon iShares Healthcare Providers is expected to under-perform the IQ Healthy. In addition to that, IShares Healthcare is 2.1 times more volatile than IQ Healthy Hearts. It trades about -0.11 of its total potential returns per unit of risk. IQ Healthy Hearts is currently generating about 0.02 per unit of volatility. If you would invest  3,102  in IQ Healthy Hearts on October 21, 2024 and sell it today you would earn a total of  13.00  from holding IQ Healthy Hearts or generate 0.42% return on investment over 90 days.

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

iShares Healthcare Providers  vs.  IQ Healthy Hearts

iShares Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Healthcare Providers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, IShares Healthcare is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

IQ Healthy Hearts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ Healthy Hearts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IQ Healthy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Healthcare and IQ Healthy

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

The idea behind iShares Healthcare Providers and IQ Healthy Hearts 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.