Correlation Between IShares Technology and REX FANG

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

Diversification Opportunities for IShares Technology and REX FANG

0.9

Correlation Coefficient

IShares Technology  REX FANG

Almost no diversification

The 3 months correlation between IShares and REX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and REX FANG Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX FANG Innovation 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 REX FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX FANG Innovation has no effect on the direction of IShares Technology i.e., IShares Technology and REX FANG go up and down completely randomly.

Pair Corralation between IShares Technology and REX FANG

Considering the 90-day investment horizon iShares Technology ETF is expected to generate 1.42 times more return on investment than REX FANG. However, IShares Technology is 1.42 times more volatile than REX FANG Innovation. It trades about 0.09 of its potential returns per unit of risk. REX FANG Innovation is currently generating about 0.11 per unit of risk. If you would invest  14,765  in iShares Technology ETF on August 30, 2024 and sell it today you would earn a total of  1,029  from holding iShares Technology ETF or generate 6.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

iShares Technology ETF  vs.  REX FANG Innovation

iShares Technology ETF

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Technology ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

REX FANG Innovation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REX FANG Innovation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, REX FANG may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares Technology and REX FANG

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

The idea behind iShares Technology ETF and REX FANG Innovation 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.