Correlation Between IShares Semiconductor and IShares Expanded

Can any of the company-specific risk be diversified away by investing in both IShares Semiconductor and IShares Expanded 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 IShares Expanded 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 iShares Expanded Tech, you can compare the effects of market volatilities on IShares Semiconductor and IShares Expanded 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 IShares Expanded. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Semiconductor and IShares Expanded.

Diversification Opportunities for IShares Semiconductor and IShares Expanded

0.31

Correlation Coefficient

IShares Semiconductor  IShares Expanded

Weak diversification

The 3 months correlation between IShares and IShares is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and iShares Expanded Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech 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 IShares Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and IShares Expanded go up and down completely randomly.

Pair Corralation between IShares Semiconductor and IShares Expanded

Given the investment horizon of 90 days IShares Semiconductor is expected to generate 3.15 times less return on investment than IShares Expanded. In addition to that, IShares Semiconductor is 1.66 times more volatile than iShares Expanded Tech. It trades about 0.04 of its total potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.19 per unit of volatility. If you would invest  8,925  in iShares Expanded Tech on September 4, 2024 and sell it today you would earn a total of  1,326  from holding iShares Expanded Tech or generate 14.86% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  iShares Expanded Tech

iShares Semiconductor ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

iShares Expanded Tech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, IShares Expanded displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and IShares Expanded

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

The idea behind iShares Semiconductor ETF and iShares Expanded Tech 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.