Correlation Between US Global and IShares US

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Can any of the company-specific risk be diversified away by investing in both US Global and IShares US 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 US Global and IShares US into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Global Sea and IShares US Aerospace, you can compare the effects of market volatilities on US Global and IShares US 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 US Global with a short position of IShares US. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Global and IShares US.

Diversification Opportunities for US Global and IShares US

-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between SEA and IShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding US Global Sea and IShares US Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares US Aerospace and US Global 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 US Global Sea are associated (or correlated) with IShares US. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares US Aerospace has no effect on the direction of US Global i.e., US Global and IShares US go up and down completely randomly.

Pair Corralation between US Global and IShares US

Considering the 90-day investment horizon US Global Sea is expected to under-perform the IShares US. In addition to that, US Global is 1.25 times more volatile than IShares US Aerospace. It trades about -0.01 of its total potential returns per unit of risk. IShares US Aerospace is currently generating about 0.25 per unit of volatility. If you would invest  12,787  in IShares US Aerospace on December 30, 2023 and sell it today you would earn a total of  406.00  from holding IShares US Aerospace or generate 3.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

US Global Sea  vs.  IShares US Aerospace

 Performance 
       Timeline  
US Global Sea 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days US Global Sea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, US Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
IShares US Aerospace 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IShares US Aerospace are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares US is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US Global and IShares US Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with US Global and IShares US

The main advantage of trading using opposite US Global and IShares US positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Global position performs unexpectedly, IShares US 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 US will offset losses from the drop in IShares US's long position.
The idea behind US Global Sea and IShares US Aerospace 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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