Correlation Between Technology Select and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Technology Select and IShares MSCI 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 MSCI 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 MSCI EAFE, you can compare the effects of market volatilities on Technology Select and IShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and IShares MSCI.
Diversification Opportunities for Technology Select and IShares MSCI
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Technology and IShares is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Technology Select i.e., Technology Select and IShares MSCI go up and down completely randomly.
Pair Corralation between Technology Select and IShares MSCI
Considering the 90-day investment horizon Technology Select Sector is expected to under-perform the IShares MSCI. In addition to that, Technology Select is 1.33 times more volatile than iShares MSCI EAFE. It trades about -0.29 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about -0.28 per unit of volatility. If you would invest 6,317 in iShares MSCI EAFE on January 20, 2024 and sell it today you would lose (258.00) from holding iShares MSCI EAFE or give up 4.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Technology Select Sector vs. iShares MSCI EAFE
Performance |
| Timeline |
| Technology Select Sector |
| iShares MSCI EAFE |
Technology Select and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and IShares MSCI
The main advantage of trading using opposite Technology Select and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| Technology Select vs. ARK Genomic Revolution | Technology Select vs. ARK Innovation ETF | Technology Select vs. ARK Space Exploration |
| IShares MSCI vs. Northern Lights | IShares MSCI vs. Dimensional International High | IShares MSCI vs. Matthews China Discovery | IShares MSCI vs. Davis Select International |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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