Correlation Between Inspire SmallMid and EA Series

Can any of the company-specific risk be diversified away by investing in both Inspire SmallMid and EA Series 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 EA Series 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 EA Series Trust, you can compare the effects of market volatilities on Inspire SmallMid and EA Series 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 EA Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire SmallMid and EA Series.

Diversification Opportunities for Inspire SmallMid and EA Series

0.7

Correlation Coefficient

Inspire SmallMid  EA Series

Poor diversification

The 3 months correlation between Inspire and STXG is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Inspire SmallMid Cap and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Inspire SmallMid i.e., Inspire SmallMid and EA Series go up and down completely randomly.

Pair Corralation between Inspire SmallMid and EA Series

Given the investment horizon of 90 days Inspire SmallMid Cap is expected to under-perform the EA Series. In addition to that, Inspire SmallMid is 1.1 times more volatile than EA Series Trust. It trades about -0.24 of its total potential returns per unit of risk. EA Series Trust is currently generating about -0.11 per unit of volatility. If you would invest  4,507  in EA Series Trust on October 7, 2024 and sell it today you would lose (107.00) from holding EA Series Trust or give up 2.37% of portfolio value over 90 days.

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

Inspire SmallMid Cap  vs.  EA Series Trust

Inspire SmallMid Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire SmallMid Cap are ranked lower than 3 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

EA Series Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Inspire SmallMid and EA Series

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

The idea behind Inspire SmallMid Cap and EA Series Trust 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.