Correlation Between IShares Financials and Themes Global

Can any of the company-specific risk be diversified away by investing in both IShares Financials 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 Financials 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 Financials ETF and Themes Global Systemically, you can compare the effects of market volatilities on IShares Financials 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 Financials with a short position of Themes Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financials and Themes Global.

Diversification Opportunities for IShares Financials and Themes Global

0.3

Correlation Coefficient

IShares Financials  Themes Global

Weak diversification

The 3 months correlation between IShares and Themes is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financials ETF 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 Financials 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 Financials ETF 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 Financials i.e., IShares Financials and Themes Global go up and down completely randomly.

Pair Corralation between IShares Financials and Themes Global

Considering the 90-day investment horizon IShares Financials is expected to generate 5.61 times less return on investment than Themes Global. But when comparing it to its historical volatility, iShares Financials ETF is 1.07 times less risky than Themes Global. It trades about 0.04 of its potential returns per unit of risk. Themes Global Systemically is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,329  in Themes Global Systemically on December 25, 2024 and sell it today you would earn a total of  581.00  from holding Themes Global Systemically or generate 17.45% return on investment over 90 days.

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

iShares Financials ETF  vs.  Themes Global Systemically

iShares Financials ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Financials ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares Financials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 17 (%) 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 Financials and Themes Global

The main advantage of trading using opposite IShares Financials and Themes Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financials 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 Financials ETF 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.

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 CEOs Directory module to screen CEOs from public companies around the world.