Correlation Between IShares Trust and IShares Tech

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

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

Diversification Opportunities for IShares Trust and IShares Tech

0.99

Correlation Coefficient

IShares Trust  IShares Tech

No risk reduction

The 3 months correlation between IShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares Tech Breakthrough in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Tech Breakthrough and IShares Trust 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 Trust are associated (or correlated) with IShares Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Tech Breakthrough has no effect on the direction of IShares Trust i.e., IShares Trust and IShares Tech go up and down completely randomly.

Pair Corralation between IShares Trust and IShares Tech

Given the investment horizon of 90 days IShares Trust is expected to generate 1.51 times less return on investment than IShares Tech. But when comparing it to its historical volatility, iShares Trust is 1.9 times less risky than IShares Tech. It trades about 0.22 of its potential returns per unit of risk. iShares Tech Breakthrough is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,133  in iShares Tech Breakthrough on May 5, 2025 and sell it today you would earn a total of  529.00  from holding iShares Tech Breakthrough or generate 10.31% return on investment over 90 days.

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

iShares Trust  vs.  iShares Tech Breakthrough

iShares Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

iShares Tech Breakthrough

Risk-Adjusted Performance

Good

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

Pair Trading with IShares Trust and IShares Tech

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

The idea behind iShares Trust and iShares Tech Breakthrough 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.