Correlation Between PHN Multi and IShares Global

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

By analyzing existing cross correlation between PHN Multi Style All Cap and iShares Global Water, you can compare the effects of market volatilities on PHN Multi and IShares Global 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 PHN Multi with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of PHN Multi and IShares Global.

Diversification Opportunities for PHN Multi and IShares Global

0.73

Correlation Coefficient

PHN Multi  IShares Global

Poor diversification

The 3 months correlation between PHN and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PHN Multi Style All Cap and iShares Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Water and PHN Multi 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 PHN Multi Style All Cap are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Water has no effect on the direction of PHN Multi i.e., PHN Multi and IShares Global go up and down completely randomly.

Pair Corralation between PHN Multi and IShares Global

Assuming the 90 days trading horizon PHN Multi Style All Cap is expected to generate 1.04 times more return on investment than IShares Global. However, PHN Multi is 1.04 times more volatile than iShares Global Water. It trades about 0.24 of its potential returns per unit of risk. iShares Global Water is currently generating about 0.11 per unit of risk. If you would invest  2,572  in PHN Multi Style All Cap on September 3, 2024 and sell it today you would earn a total of  288.00  from holding PHN Multi Style All Cap or generate 11.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

PHN Multi Style All Cap  vs.  iShares Global Water

PHN Multi Style

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PHN Multi Style All Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unfluctuating basic indicators, PHN Multi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Global Water

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PHN Multi and IShares Global

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

The idea behind PHN Multi Style All Cap and iShares Global Water 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.