Correlation Between IShares Semiconductor and MT Bank

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

Diversification Opportunities for IShares Semiconductor and MT Bank

0.42

Correlation Coefficient

IShares Semiconductor  MT Bank

Very weak diversification

The 3 months correlation between IShares and MTB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and MT Bank go up and down completely randomly.

Pair Corralation between IShares Semiconductor and MT Bank

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the MT Bank. In addition to that, IShares Semiconductor is 1.09 times more volatile than MT Bank Corp. It trades about -0.09 of its total potential returns per unit of risk. MT Bank Corp is currently generating about 0.02 per unit of volatility. If you would invest  14,544  in MT Bank Corp on January 28, 2024 and sell it today you would earn a total of  94.00  from holding MT Bank Corp or generate 0.65% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  MT Bank Corp

iShares Semiconductor ETF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Semiconductor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

MT Bank Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, MT Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Semiconductor and MT Bank

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

The idea behind iShares Semiconductor ETF and MT Bank Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.