Correlation Between IShares Technology and Alphabet

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

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

Diversification Opportunities for IShares Technology and Alphabet

-0.23

Correlation Coefficient

IShares Technology  Alphabet

Very good diversification

The 3 months correlation between IShares and Alphabet is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C and IShares Technology 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 Technology ETF are associated (or correlated) with Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of IShares Technology i.e., IShares Technology and Alphabet go up and down completely randomly.

Pair Corralation between IShares Technology and Alphabet

Considering the 90-day investment horizon iShares Technology ETF is expected to under-perform the Alphabet. But the etf apears to be less risky and, when comparing its historical volatility, iShares Technology ETF is 1.87 times less risky than Alphabet. The etf trades about -0.17 of its potential returns per unit of risk. The Alphabet Inc Class C is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15,650  in Alphabet Inc Class C on January 31, 2024 and sell it today you would earn a total of  1,140  from holding Alphabet Inc Class C or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

iShares Technology ETF  vs.  Alphabet Inc Class C

iShares Technology ETF

Risk-Adjusted Performance

1 of 100

Insignificant

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

Alphabet Class C

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Technology and Alphabet

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

The idea behind iShares Technology ETF and Alphabet Inc Class C 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.