Correlation Between IShares Trust and Themes Transatlantic

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

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

Diversification Opportunities for IShares Trust and Themes Transatlantic

0.77

Correlation Coefficient

IShares Trust  Themes Transatlantic

Poor diversification

The 3 months correlation between IShares and Themes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Themes Transatlantic Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Transatlantic and IShares Trust 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 Trust are associated (or correlated) with Themes Transatlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Transatlantic has no effect on the direction of IShares Trust i.e., IShares Trust and Themes Transatlantic go up and down completely randomly.

Pair Corralation between IShares Trust and Themes Transatlantic

Given the investment horizon of 90 days iShares Trust is expected to under-perform the Themes Transatlantic. But the etf apears to be less risky and, when comparing its historical volatility, iShares Trust is 2.04 times less risky than Themes Transatlantic. The etf trades about 0.0 of its potential returns per unit of risk. The Themes Transatlantic Defense is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,537  in Themes Transatlantic Defense on October 8, 2024 and sell it today you would earn a total of  24.00  from holding Themes Transatlantic Defense or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.16%
Values	Daily Returns

iShares Trust  vs.  Themes Transatlantic Defense

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Themes Transatlantic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Themes Transatlantic is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Trust and Themes Transatlantic

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

The idea behind iShares Trust and Themes Transatlantic Defense 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.