Correlation Between Exchange Traded and IShares Basic

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

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

Diversification Opportunities for Exchange Traded and IShares Basic

0.15

Correlation Coefficient

Exchange Traded  IShares Basic

Average diversification

The 3 months correlation between Exchange and IShares is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Traded Concepts and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and Exchange Traded 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 Exchange Traded Concepts are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of Exchange Traded i.e., Exchange Traded and IShares Basic go up and down completely randomly.

Pair Corralation between Exchange Traded and IShares Basic

Given the investment horizon of 90 days Exchange Traded Concepts is expected to under-perform the IShares Basic. In addition to that, Exchange Traded is 1.5 times more volatile than iShares Basic Materials. It trades about -0.02 of its total potential returns per unit of risk. iShares Basic Materials is currently generating about 0.07 per unit of volatility. If you would invest  12,870  in iShares Basic Materials on December 29, 2024 and sell it today you would earn a total of  536.00  from holding iShares Basic Materials or generate 4.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Exchange Traded Concepts  vs.  iShares Basic Materials

Exchange Traded Concepts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Exchange Traded is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Basic Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Basic Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Basic is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exchange Traded and IShares Basic

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

The idea behind Exchange Traded Concepts and iShares Basic Materials 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.