Correlation Between Pareto Nordic and IShares Equity

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

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

Diversification Opportunities for Pareto Nordic and IShares Equity

-0.28

Correlation Coefficient

Pareto Nordic  IShares Equity

Very good diversification

The 3 months correlation between Pareto and IShares is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Pareto Nordic Equity and iShares Equity Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equity Enhanced and Pareto Nordic 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 Pareto Nordic Equity are associated (or correlated) with IShares Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equity Enhanced has no effect on the direction of Pareto Nordic i.e., Pareto Nordic and IShares Equity go up and down completely randomly.

Pair Corralation between Pareto Nordic and IShares Equity

Assuming the 90 days trading horizon Pareto Nordic Equity is expected to under-perform the IShares Equity. But the fund apears to be less risky and, when comparing its historical volatility, Pareto Nordic Equity is 1.1 times less risky than IShares Equity. The fund trades about 0.0 of its potential returns per unit of risk. The iShares Equity Enhanced is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  528.00  in iShares Equity Enhanced on October 26, 2024 and sell it today you would earn a total of  15.00  from holding iShares Equity Enhanced or generate 2.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pareto Nordic Equity  vs.  iShares Equity Enhanced

Pareto Nordic Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pareto Nordic Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Pareto Nordic is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Equity Enhanced

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Equity Enhanced are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, IShares Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Pareto Nordic and IShares Equity

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

The idea behind Pareto Nordic Equity and iShares Equity Enhanced 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 Transaction History module to view history of all your transactions and understand their impact on performance.