Correlation Between IShares Trust and Cable One

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

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

Diversification Opportunities for IShares Trust and Cable One

0.82

Correlation Coefficient

IShares Trust  Cable One

Very poor diversification

The 3 months correlation between IShares and Cable is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and IShares Trust 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 Trust are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of IShares Trust i.e., IShares Trust and Cable One go up and down completely randomly.

Pair Corralation between IShares Trust and Cable One

Assuming the 90 days trading horizon IShares Trust is expected to generate 3.83 times less return on investment than Cable One. But when comparing it to its historical volatility, iShares Trust is 1.8 times less risky than Cable One. It trades about 0.09 of its potential returns per unit of risk. Cable One is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  937.00  in Cable One on September 12, 2024 and sell it today you would earn a total of  276.00  from holding Cable One or generate 29.46% return on investment over 90 days.

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

iShares Trust   vs.  Cable One

iShares Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cable One

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and Cable One

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

The idea behind iShares Trust and Cable One 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.