Correlation Between IShares Global and Virtus Reaves

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

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

Diversification Opportunities for IShares Global and Virtus Reaves

0.1

Correlation Coefficient

IShares Global  Virtus Reaves

Average diversification

The 3 months correlation between IShares and Virtus is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Utilities and Virtus Reaves Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Reaves Utilities and IShares Global 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 Global Utilities are associated (or correlated) with Virtus Reaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Reaves Utilities has no effect on the direction of IShares Global i.e., IShares Global and Virtus Reaves go up and down completely randomly.

Pair Corralation between IShares Global and Virtus Reaves

Considering the 90-day investment horizon IShares Global is expected to generate 4.59 times less return on investment than Virtus Reaves. But when comparing it to its historical volatility, iShares Global Utilities is 1.6 times less risky than Virtus Reaves. It trades about 0.04 of its potential returns per unit of risk. Virtus Reaves Utilities is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,390  in Virtus Reaves Utilities on September 13, 2024 and sell it today you would earn a total of  1,176  from holding Virtus Reaves Utilities or generate 21.82% return on investment over 90 days.

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

iShares Global Utilities  vs.  Virtus Reaves Utilities

iShares Global Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Virtus Reaves Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Reaves Utilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Virtus Reaves may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Global and Virtus Reaves

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

The idea behind iShares Global Utilities and Virtus Reaves Utilities 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.