Correlation Between Intel and IShares Aerospace

Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel and IShares Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intel and iShares Aerospace Defense, you can compare the effects of market volatilities on Intel 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 Intel with a short position of IShares Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and IShares Aerospace.

Diversification Opportunities for Intel and IShares Aerospace

0.52

Correlation Coefficient

Intel  IShares Aerospace

Very weak diversification

The 3 months correlation between Intel and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Intel 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 Intel 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 Intel 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 Intel i.e., Intel and IShares Aerospace go up and down completely randomly.

Pair Corralation between Intel and IShares Aerospace

Given the investment horizon of 90 days Intel is expected to under-perform the IShares Aerospace. In addition to that, Intel is 3.21 times more volatile than iShares Aerospace Defense. It trades about -0.07 of its total potential returns per unit of risk. iShares Aerospace Defense is currently generating about 0.08 per unit of volatility. If you would invest  13,256  in iShares Aerospace Defense on October 1, 2024 and sell it today you would earn a total of  1,506  from holding iShares Aerospace Defense or generate 11.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Intel  vs.  iShares Aerospace Defense

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

iShares Aerospace Defense

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Intel and IShares Aerospace

The main advantage of trading using opposite Intel and IShares Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.