Correlation Between IPath Series and Utilities Select

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

By analyzing existing cross correlation between iPath Series B and Utilities Select Sector, you can compare the effects of market volatilities on IPath Series and Utilities Select 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 IPath Series with a short position of Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and Utilities Select.

Diversification Opportunities for IPath Series and Utilities Select

-0.81

Correlation Coefficient

IPath Series  Utilities Select

Pay attention - limited upside

The 3 months correlation between IPath and Utilities is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and IPath Series 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 iPath Series B are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of IPath Series i.e., IPath Series and Utilities Select go up and down completely randomly.

Pair Corralation between IPath Series and Utilities Select

Considering the 90-day investment horizon iPath Series B is expected to under-perform the Utilities Select. In addition to that, IPath Series is 4.09 times more volatile than Utilities Select Sector. It trades about -0.12 of its total potential returns per unit of risk. Utilities Select Sector is currently generating about 0.16 per unit of volatility. If you would invest  7,900  in Utilities Select Sector on May 4, 2025 and sell it today you would earn a total of  680.00  from holding Utilities Select Sector or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

iPath Series B  vs.  Utilities Select Sector

iPath Series B

Risk-Adjusted Performance

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Utilities Select Sector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Select Sector are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Utilities Select may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IPath Series and Utilities Select

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

The idea behind iPath Series B and Utilities Select Sector 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.