Correlation Between IShares Utilities and DGA Absolute

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

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

Diversification Opportunities for IShares Utilities and DGA Absolute

0.57

Correlation Coefficient

IShares Utilities  DGA Absolute

Very weak diversification

The 3 months correlation between IShares and DGA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and DGA Absolute Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGA Absolute Return and IShares Utilities 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 Utilities ETF are associated (or correlated) with DGA Absolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGA Absolute Return has no effect on the direction of IShares Utilities i.e., IShares Utilities and DGA Absolute go up and down completely randomly.

Pair Corralation between IShares Utilities and DGA Absolute

Considering the 90-day investment horizon iShares Utilities ETF is expected to generate 1.56 times more return on investment than DGA Absolute. However, IShares Utilities is 1.56 times more volatile than DGA Absolute Return. It trades about 0.33 of its potential returns per unit of risk. DGA Absolute Return is currently generating about 0.15 per unit of risk. If you would invest  7,808  in iShares Utilities ETF on February 16, 2024 and sell it today you would earn a total of  1,400  from holding iShares Utilities ETF or generate 17.93% return on investment over 90 days.

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

iShares Utilities ETF  vs.  DGA Absolute Return

iShares Utilities ETF

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Utilities ETF are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, IShares Utilities unveiled solid returns over the last few months and may actually be approaching a breakup point.

DGA Absolute Return

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DGA Absolute Return are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, DGA Absolute is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Utilities and DGA Absolute

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

The idea behind iShares Utilities ETF and DGA Absolute Return 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.