Correlation Between IShares Semiconductor and Principal Lifetime

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Can any of the company-specific risk be diversified away by investing in both IShares Semiconductor and Principal Lifetime 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 Principal Lifetime 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 Principal Lifetime 2040, you can compare the effects of market volatilities on IShares Semiconductor and Principal Lifetime 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 Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Semiconductor and Principal Lifetime.

Diversification Opportunities for IShares Semiconductor and Principal Lifetime

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between IShares and Principal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding IShares Semiconductor ETF and PRINCIPAL LIFETIME 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime 2040 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 Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime 2040 has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and Principal Lifetime go up and down completely randomly.

Pair Corralation between IShares Semiconductor and Principal Lifetime

Given the investment horizon of 90 days IShares Semiconductor ETF is expected to generate 2.34 times more return on investment than Principal Lifetime. However, IShares Semiconductor is 2.34 times more volatile than Principal Lifetime 2040. It trades about 0.07 of its potential returns per unit of risk. Principal Lifetime 2040 is currently generating about 0.05 per unit of risk. If you would invest  12,206  in IShares Semiconductor ETF on December 30, 2023 and sell it today you would earn a total of  10,386  from holding IShares Semiconductor ETF or generate 85.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.79%
ValuesDaily Returns

IShares Semiconductor ETF  vs.  PRINCIPAL LIFETIME 2040

 Performance 
       Timeline  
IShares Semiconductor ETF 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Semiconductor ETF are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.
Principal Lifetime 2040 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime 2040 are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Principal Lifetime may actually be approaching a critical reversion point that can send shares even higher in April 2024.

IShares Semiconductor and Principal Lifetime Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Semiconductor and Principal Lifetime

The main advantage of trading using opposite IShares Semiconductor and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Semiconductor position performs unexpectedly, Principal Lifetime 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 Principal Lifetime will offset losses from the drop in Principal Lifetime's long position.
The idea behind IShares Semiconductor ETF and Principal Lifetime 2040 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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