Correlation Between IShares Consumer and IShares Real

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

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

Diversification Opportunities for IShares Consumer and IShares Real

-0.39

Correlation Coefficient

IShares Consumer  IShares Real

Very good diversification

The 3 months correlation between IShares and IShares is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and iShares Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Real Estate and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with IShares Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Real Estate has no effect on the direction of IShares Consumer i.e., IShares Consumer and IShares Real go up and down completely randomly.

Pair Corralation between IShares Consumer and IShares Real

Considering the 90-day investment horizon iShares Consumer Discretionary is expected to generate 1.09 times more return on investment than IShares Real. However, IShares Consumer is 1.09 times more volatile than iShares Real Estate. It trades about 0.15 of its potential returns per unit of risk. iShares Real Estate is currently generating about 0.08 per unit of risk. If you would invest  8,084  in iShares Consumer Discretionary on September 29, 2024 and sell it today you would earn a total of  1,718  from holding iShares Consumer Discretionary or generate 21.25% return on investment over 90 days.

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

iShares Consumer Discretionary  vs.  iShares Real Estate

iShares Consumer Dis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Consumer Discretionary are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, IShares Consumer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares Consumer and IShares Real

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

The idea behind iShares Consumer Discretionary and iShares Real Estate 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.