Correlation Between Artemisome and IShares Continen

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

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

Diversification Opportunities for Artemisome and IShares Continen

0.38

Correlation Coefficient

Artemisome  IShares Continen

Weak diversification

The 3 months correlation between Artemisome and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Artemisome I and iShares Continen Eurp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Continen Eurp and Artemisome 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 Artemisome I are associated (or correlated) with IShares Continen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Continen Eurp has no effect on the direction of Artemisome i.e., Artemisome and IShares Continen go up and down completely randomly.

Pair Corralation between Artemisome and IShares Continen

Assuming the 90 days trading horizon Artemisome is expected to generate 1.04 times less return on investment than IShares Continen. But when comparing it to its historical volatility, Artemisome I is 1.18 times less risky than IShares Continen. It trades about 0.04 of its potential returns per unit of risk. iShares Continen Eurp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  97.00  in iShares Continen Eurp on September 30, 2024 and sell it today you would earn a total of  13.00  from holding iShares Continen Eurp or generate 13.4% return on investment over 90 days.

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

Artemisome I  vs.  iShares Continen Eurp

Artemisome I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artemisome I has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent forward-looking signals, Artemisome is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Continen Eurp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Continen Eurp has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, IShares Continen is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Artemisome and IShares Continen

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

The idea behind Artemisome I and iShares Continen Eurp 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.