Correlation Between IShares Global and Health Care

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

By analyzing existing cross correlation between iShares Global Energy and Health Care Select, you can compare the effects of market volatilities on IShares Global and Health Care 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 Global with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Health Care.

Diversification Opportunities for IShares Global and Health Care

-0.54

Correlation Coefficient

IShares Global  Health Care

Excellent diversification

The 3 months correlation between IShares and Health is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Energy and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select and IShares Global 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 Global Energy are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of IShares Global i.e., IShares Global and Health Care go up and down completely randomly.

Pair Corralation between IShares Global and Health Care

Considering the 90-day investment horizon IShares Global is expected to generate 27.18 times less return on investment than Health Care. In addition to that, IShares Global is 2.07 times more volatile than Health Care Select. It trades about 0.01 of its total potential returns per unit of risk. Health Care Select is currently generating about 0.38 per unit of volatility. If you would invest  13,863  in Health Care Select on February 13, 2024 and sell it today you would earn a total of  496.00  from holding Health Care Select or generate 3.58% return on investment over 90 days.

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

iShares Global Energy  vs.  Health Care Select

iShares Global Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IShares Global exhibited solid returns over the last few months and may actually be approaching a breakup point.

Health Care Select

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Health Care Select are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, Health Care is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Global and Health Care

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

The idea behind iShares Global Energy and Health Care Select 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..