Correlation Between IShares Telecommunicatio and BOOKING

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

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

Diversification Opportunities for IShares Telecommunicatio and BOOKING

-0.6

Correlation Coefficient

IShares Telecommunicatio  BOOKING

Excellent diversification

The 3 months correlation between IShares and BOOKING is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and BOOKING HOLDINGS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOOKING HOLDINGS INC and IShares Telecommunicatio 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 Telecommunications ETF are associated (or correlated) with BOOKING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOOKING HOLDINGS INC has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and BOOKING go up and down completely randomly.

Pair Corralation between IShares Telecommunicatio and BOOKING

Considering the 90-day investment horizon iShares Telecommunications ETF is expected to generate 1.62 times more return on investment than BOOKING. However, IShares Telecommunicatio is 1.62 times more volatile than BOOKING HOLDINGS INC. It trades about -0.08 of its potential returns per unit of risk. BOOKING HOLDINGS INC is currently generating about -0.24 per unit of risk. If you would invest  2,751  in iShares Telecommunications ETF on September 24, 2024 and sell it today you would lose (47.00) from holding iShares Telecommunications ETF or give up 1.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

iShares Telecommunications ETF  vs.  BOOKING HOLDINGS INC

IShares Telecommunicatio

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Telecommunications ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, IShares Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BOOKING HOLDINGS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOOKING HOLDINGS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BOOKING 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 Telecommunicatio and BOOKING

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

The idea behind iShares Telecommunications ETF and BOOKING HOLDINGS INC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.