Correlation Between IShares Semiconductor and SPDR Kensho

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

Diversification Opportunities for IShares Semiconductor and SPDR Kensho

-0.4

Correlation Coefficient

IShares Semiconductor  SPDR Kensho

Very good diversification

The 3 months correlation between IShares and SPDR is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and SPDR Kensho go up and down completely randomly.

Pair Corralation between IShares Semiconductor and SPDR Kensho

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to generate 1.88 times more return on investment than SPDR Kensho. However, IShares Semiconductor is 1.88 times more volatile than SPDR Kensho Future. It trades about 0.08 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about 0.1 per unit of risk. If you would invest  11,259  in iShares Semiconductor ETF on September 14, 2024 and sell it today you would earn a total of  10,465  from holding iShares Semiconductor ETF or generate 92.95% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  SPDR Kensho Future

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.

SPDR Kensho Future

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Future are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, SPDR Kensho unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and SPDR Kensho

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

The idea behind iShares Semiconductor ETF and SPDR Kensho Future 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.