Correlation Between Technology Select and IShares Exponential

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

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

Diversification Opportunities for Technology Select and IShares Exponential

0.73

Correlation Coefficient

Technology Select  IShares Exponential

Poor diversification

The 3 months correlation between Technology and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and iShares Exponential Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Exponential and Technology Select 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 Technology Select Sector are associated (or correlated) with IShares Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Exponential has no effect on the direction of Technology Select i.e., Technology Select and IShares Exponential go up and down completely randomly.

Pair Corralation between Technology Select and IShares Exponential

Considering the 90-day investment horizon Technology Select is expected to generate 1.12 times less return on investment than IShares Exponential. In addition to that, Technology Select is 1.36 times more volatile than iShares Exponential Technologies. It trades about 0.01 of its total potential returns per unit of risk. iShares Exponential Technologies is currently generating about 0.01 per unit of volatility. If you would invest  6,007  in iShares Exponential Technologies on October 8, 2024 and sell it today you would earn a total of  24.00  from holding iShares Exponential Technologies or generate 0.4% return on investment over 90 days.

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

Technology Select Sector  vs.  iShares Exponential Technologi

Technology Select Sector

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Exponential

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Technology Select and IShares Exponential

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

The idea behind Technology Select Sector and iShares Exponential Technologies 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.