Correlation Between IShares SP and RAYTHEON

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

By analyzing existing cross correlation between iShares SP 500 and RAYTHEON TECHNOLOGIES PORATION, you can compare the effects of market volatilities on IShares SP and RAYTHEON 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 SP with a short position of RAYTHEON. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and RAYTHEON.

Diversification Opportunities for IShares SP and RAYTHEON

-0.62

Correlation Coefficient

IShares SP  RAYTHEON

Excellent diversification

The 3 months correlation between IShares and RAYTHEON is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and RAYTHEON TECHNOLOGIES PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAYTHEON TECHNOLOGIES and IShares SP 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 SP 500 are associated (or correlated) with RAYTHEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAYTHEON TECHNOLOGIES has no effect on the direction of IShares SP i.e., IShares SP and RAYTHEON go up and down completely randomly.

Pair Corralation between IShares SP and RAYTHEON

Considering the 90-day investment horizon iShares SP 500 is expected to generate 0.68 times more return on investment than RAYTHEON. However, iShares SP 500 is 1.48 times less risky than RAYTHEON. It trades about 0.09 of its potential returns per unit of risk. RAYTHEON TECHNOLOGIES PORATION is currently generating about 0.01 per unit of risk. If you would invest  9,678  in iShares SP 500 on October 11, 2024 and sell it today you would earn a total of  576.00  from holding iShares SP 500 or generate 5.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	83.87%
Values	Daily Returns

iShares SP 500  vs.  RAYTHEON TECHNOLOGIES PORATION

iShares SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RAYTHEON TECHNOLOGIES PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RAYTHEON 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 SP and RAYTHEON

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

The idea behind iShares SP 500 and RAYTHEON TECHNOLOGIES PORATION 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.