Correlation Between Utilities Select and IShares Utilities

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

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

Diversification Opportunities for Utilities Select and IShares Utilities

0.99

Correlation Coefficient

Utilities Select  IShares Utilities

No risk reduction

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

Pair Corralation between Utilities Select and IShares Utilities

Considering the 90-day investment horizon Utilities Select Sector is expected to generate 1.02 times more return on investment than IShares Utilities. However, Utilities Select is 1.02 times more volatile than iShares Utilities ETF. It trades about 0.16 of its potential returns per unit of risk. iShares Utilities ETF is currently generating about 0.14 per unit of risk. If you would invest  7,900  in Utilities Select Sector on May 5, 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 Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Utilities Select Sector  vs.  iShares Utilities ETF

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.

iShares Utilities ETF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Utilities ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish fundamental indicators, IShares Utilities may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Utilities Select and IShares Utilities

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

The idea behind Utilities Select Sector and iShares Utilities ETF 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 Commodity Directory module to find actively traded commodities issued by global exchanges.