Correlation Between IShares Fundamental and Thermal Energy

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

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

Diversification Opportunities for IShares Fundamental and Thermal Energy

0.05

Correlation Coefficient

IShares Fundamental  Thermal Energy

Significant diversification

The 3 months correlation between IShares and Thermal is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Thermal Energy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermal Energy Inter and IShares Fundamental 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 Fundamental Hedged are associated (or correlated) with Thermal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermal Energy Inter has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Thermal Energy go up and down completely randomly.

Pair Corralation between IShares Fundamental and Thermal Energy

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 0.11 times more return on investment than Thermal Energy. However, iShares Fundamental Hedged is 8.73 times less risky than Thermal Energy. It trades about -0.01 of its potential returns per unit of risk. Thermal Energy International is currently generating about -0.07 per unit of risk. If you would invest  5,380  in iShares Fundamental Hedged on December 30, 2024 and sell it today you would lose (39.00) from holding iShares Fundamental Hedged or give up 0.72% of portfolio value over 90 days.

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

iShares Fundamental Hedged  vs.  Thermal Energy International

iShares Fundamental

Risk-Adjusted Performance

Very Weak

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

Thermal Energy Inter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermal Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with IShares Fundamental and Thermal Energy

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

The idea behind iShares Fundamental Hedged and Thermal Energy International 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 CEOs Directory module to screen CEOs from public companies around the world.