Correlation Between IShares Industrials and IShares Real

Can any of the company-specific risk be diversified away by investing in both IShares Industrials 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 Industrials 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 Industrials ETF and iShares Real Estate, you can compare the effects of market volatilities on IShares Industrials 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 Industrials with a short position of IShares Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Industrials and IShares Real.

Diversification Opportunities for IShares Industrials and IShares Real

0.14

Correlation Coefficient

IShares Industrials  IShares Real

Average diversification

The 3 months correlation between IShares and IShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF 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 Industrials 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 Industrials ETF 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 Industrials i.e., IShares Industrials and IShares Real go up and down completely randomly.

Pair Corralation between IShares Industrials and IShares Real

Considering the 90-day investment horizon iShares Industrials ETF is expected to generate 0.99 times more return on investment than IShares Real. However, iShares Industrials ETF is 1.01 times less risky than IShares Real. It trades about 0.12 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  11,774  in iShares Industrials ETF on September 29, 2024 and sell it today you would earn a total of  1,734  from holding iShares Industrials ETF or generate 14.73% return on investment over 90 days.

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

iShares Industrials ETF  vs.  iShares Real Estate

iShares Industrials ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Industrials ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, IShares Industrials is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

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 Industrials and IShares Real

The main advantage of trading using opposite IShares Industrials and IShares Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials 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 Industrials ETF 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.