Correlation Between IShares NAFTRAC and Masco

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

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

Diversification Opportunities for IShares NAFTRAC and Masco

-0.61

Correlation Coefficient

IShares NAFTRAC  Masco

Excellent diversification

The 3 months correlation between IShares and Masco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares NAFTRAC and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and IShares NAFTRAC 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 NAFTRAC are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of IShares NAFTRAC i.e., IShares NAFTRAC and Masco go up and down completely randomly.

Pair Corralation between IShares NAFTRAC and Masco

If you would invest  114,826  in Masco on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Masco or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

iShares NAFTRAC  vs.  Masco

iShares NAFTRAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares NAFTRAC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares NAFTRAC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Masco

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Masco 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 NAFTRAC and Masco

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

The idea behind iShares NAFTRAC and Masco 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.