Correlation Between IShares Telecommunicatio and IShares Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both IShares Telecommunicatio and IShares Pharmaceuticals 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 Telecommunicatio and IShares Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Telecommunications ETF and iShares Pharmaceuticals ETF, you can compare the effects of market volatilities on IShares Telecommunicatio and IShares Pharmaceuticals 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 Telecommunicatio with a short position of IShares Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Telecommunicatio and IShares Pharmaceuticals.
Diversification Opportunities for IShares Telecommunicatio and IShares Pharmaceuticals
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares Telecommunications ETF and iShares Pharmaceuticals ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Pharmaceuticals and IShares Telecommunicatio 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 Telecommunications ETF are associated (or correlated) with IShares Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Pharmaceuticals has no effect on the direction of IShares Telecommunicatio i.e., IShares Telecommunicatio and IShares Pharmaceuticals go up and down completely randomly.
Pair Corralation between IShares Telecommunicatio and IShares Pharmaceuticals
Considering the 90-day investment horizon IShares Telecommunicatio is expected to generate 2.45 times less return on investment than IShares Pharmaceuticals. In addition to that, IShares Telecommunicatio is 1.12 times more volatile than iShares Pharmaceuticals ETF. It trades about 0.08 of its total potential returns per unit of risk. iShares Pharmaceuticals ETF is currently generating about 0.21 per unit of volatility. If you would invest 7,487 in iShares Pharmaceuticals ETF on October 6, 2025 and sell it today you would earn a total of 1,000.00 from holding iShares Pharmaceuticals ETF or generate 13.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Telecommunications ETF vs. iShares Pharmaceuticals ETF
Performance |
| Timeline |
| IShares Telecommunicatio |
| iShares Pharmaceuticals |
IShares Telecommunicatio and IShares Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Telecommunicatio and IShares Pharmaceuticals
The main advantage of trading using opposite IShares Telecommunicatio and IShares Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Telecommunicatio position performs unexpectedly, IShares Pharmaceuticals 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 Pharmaceuticals will offset losses from the drop in IShares Pharmaceuticals' long position.The idea behind iShares Telecommunications ETF and iShares Pharmaceuticals 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.
Check out your portfolio center.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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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