Correlation Between IShares Semiconductor and Disney

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

Diversification Opportunities for IShares Semiconductor and Disney

0.81

Correlation Coefficient

IShares Semiconductor  Disney

Very poor diversification

The 3 months correlation between IShares and Disney is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and Disney go up and down completely randomly.

Pair Corralation between IShares Semiconductor and Disney

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to generate 1.08 times more return on investment than Disney. However, IShares Semiconductor is 1.08 times more volatile than Walt Disney. It trades about 0.05 of its potential returns per unit of risk. Walt Disney is currently generating about 0.01 per unit of risk. If you would invest  13,638  in iShares Semiconductor ETF on January 24, 2024 and sell it today you would earn a total of  6,528  from holding iShares Semiconductor ETF or generate 47.87% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  Walt Disney

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.

Walt Disney

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and Disney

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

The idea behind iShares Semiconductor ETF and Walt Disney 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.