Correlation Between IShares Consumer and ALPS

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

Diversification Opportunities for IShares Consumer and ALPS

0.87

Correlation Coefficient

IShares Consumer  ALPS

Very poor diversification

The 3 months correlation between IShares and ALPS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of IShares Consumer i.e., IShares Consumer and ALPS go up and down completely randomly.

Pair Corralation between IShares Consumer and ALPS

If you would invest  9,680  in iShares Consumer Discretionary on September 25, 2024 and sell it today you would earn a total of  106.00  from holding iShares Consumer Discretionary or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	5.0%
Values	Daily Returns

iShares Consumer Discretionary  vs.  ALPS

iShares Consumer Dis

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Consumer Discretionary are ranked lower than 15 (%) 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.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Consumer and ALPS

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

The idea behind iShares Consumer Discretionary and ALPS 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.