Correlation Between IShares Regional and Themes Global

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

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

Diversification Opportunities for IShares Regional and Themes Global

-0.36

Correlation Coefficient

IShares Regional  Themes Global

Very good diversification

The 3 months correlation between IShares and Themes is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding iShares Regional Banks and Themes Global Systemically in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Global System and IShares Regional 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 Regional Banks are associated (or correlated) with Themes Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Global System has no effect on the direction of IShares Regional i.e., IShares Regional and Themes Global go up and down completely randomly.

Pair Corralation between IShares Regional and Themes Global

Considering the 90-day investment horizon iShares Regional Banks is expected to under-perform the Themes Global. In addition to that, IShares Regional is 1.17 times more volatile than Themes Global Systemically. It trades about -0.07 of its total potential returns per unit of risk. Themes Global Systemically is currently generating about 0.22 per unit of volatility. If you would invest  3,322  in Themes Global Systemically on December 28, 2024 and sell it today you would earn a total of  552.00  from holding Themes Global Systemically or generate 16.62% return on investment over 90 days.

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

iShares Regional Banks  vs.  Themes Global Systemically

iShares Regional Banks

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Regional Banks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Regional is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Themes Global System

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Global Systemically are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Themes Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Regional and Themes Global

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

The idea behind iShares Regional Banks and Themes Global Systemically 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.