Correlation Between IShares Semiconductor and ETRACS Alerian

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

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

Diversification Opportunities for IShares Semiconductor and ETRACS Alerian

-0.48

Correlation Coefficient

IShares Semiconductor  ETRACS Alerian

Very good diversification

The 3 months correlation between IShares and ETRACS is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and ETRACS Alerian Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Alerian Midstream and IShares Semiconductor 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 Semiconductor ETF are associated (or correlated) with ETRACS Alerian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Alerian Midstream has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and ETRACS Alerian go up and down completely randomly.

Pair Corralation between IShares Semiconductor and ETRACS Alerian

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the ETRACS Alerian. In addition to that, IShares Semiconductor is 1.49 times more volatile than ETRACS Alerian Midstream. It trades about 0.0 of its total potential returns per unit of risk. ETRACS Alerian Midstream is currently generating about 0.19 per unit of volatility. If you would invest  4,654  in ETRACS Alerian Midstream on September 13, 2024 and sell it today you would earn a total of  704.00  from holding ETRACS Alerian Midstream or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

iShares Semiconductor ETF  vs.  ETRACS Alerian Midstream

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ETRACS Alerian Midstream

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Alerian Midstream are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ETRACS Alerian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and ETRACS Alerian

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

The idea behind iShares Semiconductor ETF and ETRACS Alerian Midstream 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.