Correlation Between Inspire SmallMid and Inspire Tactical

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

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

Diversification Opportunities for Inspire SmallMid and Inspire Tactical

0.89

Correlation Coefficient

Inspire SmallMid  Inspire Tactical

Very poor diversification

The 3 months correlation between Inspire and Inspire is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Inspire SmallMid Cap and Inspire Tactical Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Tactical Balanced and Inspire SmallMid 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 Inspire SmallMid Cap are associated (or correlated) with Inspire Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Tactical Balanced has no effect on the direction of Inspire SmallMid i.e., Inspire SmallMid and Inspire Tactical go up and down completely randomly.

Pair Corralation between Inspire SmallMid and Inspire Tactical

Given the investment horizon of 90 days Inspire SmallMid Cap is expected to under-perform the Inspire Tactical. In addition to that, Inspire SmallMid is 1.72 times more volatile than Inspire Tactical Balanced. It trades about -0.28 of its total potential returns per unit of risk. Inspire Tactical Balanced is currently generating about -0.45 per unit of volatility. If you would invest  2,819  in Inspire Tactical Balanced on September 29, 2024 and sell it today you would lose (158.00) from holding Inspire Tactical Balanced or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Inspire SmallMid Cap  vs.  Inspire Tactical Balanced

Inspire SmallMid Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire SmallMid Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Inspire SmallMid is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Inspire Tactical Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Inspire SmallMid and Inspire Tactical

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

The idea behind Inspire SmallMid Cap and Inspire Tactical Balanced 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..