Correlation Between IShares Trust and ETF Diario

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

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

Diversification Opportunities for IShares Trust and ETF Diario

0.63

Correlation Coefficient

IShares Trust  ETF Diario

Poor diversification

The 3 months correlation between IShares and ETF is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and ETF Diario Inverso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Diario Inverso and IShares Trust 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 Trust are associated (or correlated) with ETF Diario. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Diario Inverso has no effect on the direction of IShares Trust i.e., IShares Trust and ETF Diario go up and down completely randomly.

Pair Corralation between IShares Trust and ETF Diario

Assuming the 90 days trading horizon iShares Trust is expected to under-perform the ETF Diario. In addition to that, IShares Trust is 2.06 times more volatile than ETF Diario Inverso. It trades about -0.17 of its total potential returns per unit of risk. ETF Diario Inverso is currently generating about 0.09 per unit of volatility. If you would invest  1,250  in ETF Diario Inverso on September 26, 2024 and sell it today you would earn a total of  20.00  from holding ETF Diario Inverso or generate 1.6% return on investment over 90 days.

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

iShares Trust   vs.  ETF Diario Inverso

iShares Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ETF Diario Inverso

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Diario Inverso are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ETF Diario may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Trust and ETF Diario

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

The idea behind iShares Trust and ETF Diario Inverso 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.