Correlation Between IShares Semiconductor and SP Funds

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

Diversification Opportunities for IShares Semiconductor and SP Funds

0.66

Correlation Coefficient

IShares Semiconductor  SP Funds

Poor diversification

The 3 months correlation between IShares and SPTE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and SP Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds Trust 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 SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds Trust has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and SP Funds go up and down completely randomly.

Pair Corralation between IShares Semiconductor and SP Funds

Given the investment horizon of 90 days IShares Semiconductor is expected to generate 3.91 times less return on investment than SP Funds. In addition to that, IShares Semiconductor is 1.4 times more volatile than SP Funds Trust. It trades about 0.02 of its total potential returns per unit of risk. SP Funds Trust is currently generating about 0.1 per unit of volatility. If you would invest  2,556  in SP Funds Trust on September 3, 2024 and sell it today you would earn a total of  218.00  from holding SP Funds Trust or generate 8.53% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  SP Funds Trust

iShares Semiconductor ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

SP Funds Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SP Funds Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, SP Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares Semiconductor and SP Funds

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

The idea behind iShares Semiconductor ETF and SP Funds Trust 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 Commodity Directory module to find actively traded commodities issued by global exchanges.