Correlation Between IShares Expanded and IShares Aerospace

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

Diversification Opportunities for IShares Expanded and IShares Aerospace

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between IShares and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and iShares Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aerospace Defense and IShares Expanded 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 Expanded Tech Software are associated (or correlated) with IShares Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aerospace Defense has no effect on the direction of IShares Expanded i.e., IShares Expanded and IShares Aerospace go up and down completely randomly.

Pair Corralation between IShares Expanded and IShares Aerospace

Considering the 90-day investment horizon IShares Expanded is expected to generate 1.78 times less return on investment than IShares Aerospace. In addition to that, IShares Expanded is 1.17 times more volatile than iShares Aerospace Defense. It trades about 0.18 of its total potential returns per unit of risk. iShares Aerospace Defense is currently generating about 0.37 per unit of volatility. If you would invest  16,016  in iShares Aerospace Defense on May 7, 2025 and sell it today you would earn a total of  3,775  from holding iShares Aerospace Defense or generate 23.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

iShares Expanded Tech Software  vs.  iShares Aerospace Defense

 Performance 
       Timeline  
iShares Expanded Tech 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, IShares Expanded may actually be approaching a critical reversion point that can send shares even higher in September 2025.
iShares Aerospace Defense 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Aerospace Defense are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

IShares Expanded and IShares Aerospace Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Expanded and IShares Aerospace

The main advantage of trading using opposite IShares Expanded and IShares Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded position performs unexpectedly, IShares Aerospace 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 Aerospace will offset losses from the drop in IShares Aerospace's long position.
The idea behind iShares Expanded Tech Software and iShares Aerospace Defense 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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