Correlation Between IShares SP and Inspire Faithward

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

By analyzing existing cross correlation between iShares SP Small Cap and Inspire Faithward Mid, you can compare the effects of market volatilities on IShares SP and Inspire Faithward 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 SP with a short position of Inspire Faithward. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Inspire Faithward.

Diversification Opportunities for IShares SP and Inspire Faithward

0.98

Correlation Coefficient

IShares SP  Inspire Faithward

Almost no diversification

The 3 months correlation between IShares and Inspire is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP Small Cap and Inspire Faithward Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Faithward Mid and IShares SP 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 SP Small Cap are associated (or correlated) with Inspire Faithward. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Faithward Mid has no effect on the direction of IShares SP i.e., IShares SP and Inspire Faithward go up and down completely randomly.

Pair Corralation between IShares SP and Inspire Faithward

Considering the 90-day investment horizon iShares SP Small Cap is expected to under-perform the Inspire Faithward. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP Small Cap is 1.03 times less risky than Inspire Faithward. The etf trades about -0.12 of its potential returns per unit of risk. The Inspire Faithward Mid is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,094  in Inspire Faithward Mid on December 29, 2024 and sell it today you would lose (212.00) from holding Inspire Faithward Mid or give up 6.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

iShares SP Small Cap  vs.  Inspire Faithward Mid

iShares SP Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's forward-looking indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Inspire Faithward Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inspire Faithward Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares SP and Inspire Faithward

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

The idea behind iShares SP Small Cap and Inspire Faithward Mid 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.