Correlation Between IShares Semiconductor and Defiance Quantum

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

Diversification Opportunities for IShares Semiconductor and Defiance Quantum

-0.44

Correlation Coefficient

IShares Semiconductor  Defiance Quantum

Very good diversification

The 3 months correlation between IShares and Defiance is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and Defiance Quantum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Quantum ETF 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 Defiance Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Quantum ETF has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and Defiance Quantum go up and down completely randomly.

Pair Corralation between IShares Semiconductor and Defiance Quantum

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the Defiance Quantum. But the etf apears to be less risky and, when comparing its historical volatility, iShares Semiconductor ETF is 1.18 times less risky than Defiance Quantum. The etf trades about -0.03 of its potential returns per unit of risk. The Defiance Quantum ETF is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  6,138  in Defiance Quantum ETF on September 23, 2024 and sell it today you would earn a total of  1,978  from holding Defiance Quantum ETF or generate 32.23% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  Defiance Quantum ETF

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Defiance Quantum ETF

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Quantum ETF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Defiance Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Semiconductor and Defiance Quantum

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

The idea behind iShares Semiconductor ETF and Defiance Quantum ETF 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.