Correlation Between IShares Consumer and IShares Evolved

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

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

Diversification Opportunities for IShares Consumer and IShares Evolved

0.96

Correlation Coefficient

IShares Consumer  IShares Evolved

Almost no diversification

The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and iShares Evolved Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Evolved Disc and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with IShares Evolved. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Evolved Disc has no effect on the direction of IShares Consumer i.e., IShares Consumer and IShares Evolved go up and down completely randomly.

Pair Corralation between IShares Consumer and IShares Evolved

Considering the 90-day investment horizon iShares Consumer Discretionary is expected to generate 1.26 times more return on investment than IShares Evolved. However, IShares Consumer is 1.26 times more volatile than iShares Evolved Discretionary. It trades about 0.33 of its potential returns per unit of risk. iShares Evolved Discretionary is currently generating about 0.3 per unit of risk. If you would invest  8,229  in iShares Consumer Discretionary on September 1, 2024 and sell it today you would earn a total of  1,540  from holding iShares Consumer Discretionary or generate 18.71% return on investment over 90 days.

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

iShares Consumer Discretionary  vs.  iShares Evolved Discretionary

iShares Consumer Dis

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Consumer Discretionary are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, IShares Consumer exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares Evolved Disc

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Evolved Discretionary are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, IShares Evolved may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Consumer and IShares Evolved

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

The idea behind iShares Consumer Discretionary and iShares Evolved Discretionary 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.