Correlation Between IShares Exponential and Technology Select

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

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

Diversification Opportunities for IShares Exponential and Technology Select

0.87

Correlation Coefficient

IShares Exponential  Technology Select

Very poor diversification

The 3 months correlation between IShares and Technology is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Exponential Technologi and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector and IShares Exponential 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 Exponential Technologies are associated (or correlated) with Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of IShares Exponential i.e., IShares Exponential and Technology Select go up and down completely randomly.

Pair Corralation between IShares Exponential and Technology Select

Allowing for the 90-day total investment horizon iShares Exponential Technologies is expected to under-perform the Technology Select. But the etf apears to be less risky and, when comparing its historical volatility, iShares Exponential Technologies is 1.11 times less risky than Technology Select. The etf trades about -0.05 of its potential returns per unit of risk. The Technology Select Sector is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  20,411  in Technology Select Sector on February 4, 2024 and sell it today you would lose (156.00) from holding Technology Select Sector or give up 0.76% of portfolio value over 90 days.

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

iShares Exponential Technologi  vs.  Technology Select Sector

iShares Exponential

Risk-Adjusted Performance

1 of 100

Weak

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

Technology Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Technology Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Exponential and Technology Select

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

The idea behind iShares Exponential Technologies and Technology Select Sector 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.