Correlation Between IShares Consumer and Industrial Select
Can any of the company-specific risk be diversified away by investing in both IShares Consumer and Industrial Select 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 Consumer and Industrial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Consumer Discretionary and Industrial Select Sector, you can compare the effects of market volatilities on IShares Consumer and Industrial Select 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 Consumer with a short position of Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and Industrial Select.
Diversification Opportunities for IShares Consumer and Industrial Select
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Industrial is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of IShares Consumer i.e., IShares Consumer and Industrial Select go up and down completely randomly.
Pair Corralation between IShares Consumer and Industrial Select
Considering the 90-day investment horizon IShares Consumer is expected to generate 1.04 times less return on investment than Industrial Select. In addition to that, IShares Consumer is 1.22 times more volatile than Industrial Select Sector. It trades about 0.06 of its total potential returns per unit of risk. Industrial Select Sector is currently generating about 0.08 per unit of volatility. If you would invest 8,415 in Industrial Select Sector on March 12, 2024 and sell it today you would earn a total of 3,818 from holding Industrial Select Sector or generate 45.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Consumer Discretionary vs. Industrial Select Sector
Performance |
Timeline |
iShares Consumer Dis |
Industrial Select Sector |
IShares Consumer and Industrial Select Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Consumer and Industrial Select
The main advantage of trading using opposite IShares Consumer and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select's long position.IShares Consumer vs. iShares Global Industrials | IShares Consumer vs. iShares Global Consumer | IShares Consumer vs. iShares Global Utilities | IShares Consumer vs. iShares Global Materials |
Industrial Select vs. iShares Global Consumer | Industrial Select vs. iShares Global Utilities | Industrial Select vs. iShares Global Consumer | Industrial Select vs. iShares Global Materials |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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