Correlation Between Freedom Day and IShares Future

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

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

Diversification Opportunities for Freedom Day and IShares Future

0.7

Correlation Coefficient

Freedom Day  IShares Future

Poor diversification

The 3 months correlation between Freedom and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and iShares Future AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Future AI and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with IShares Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Future AI has no effect on the direction of Freedom Day i.e., Freedom Day and IShares Future go up and down completely randomly.

Pair Corralation between Freedom Day and IShares Future

Given the investment horizon of 90 days Freedom Day is expected to generate 18.4 times less return on investment than IShares Future. But when comparing it to its historical volatility, Freedom Day Dividend is 2.21 times less risky than IShares Future. It trades about 0.04 of its potential returns per unit of risk. iShares Future AI is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  3,529  in iShares Future AI on September 19, 2024 and sell it today you would earn a total of  339.00  from holding iShares Future AI or generate 9.61% return on investment over 90 days.

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

Freedom Day Dividend  vs.  iShares Future AI

Freedom Day Dividend

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

iShares Future AI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Future AI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Future showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freedom Day and IShares Future

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

The idea behind Freedom Day Dividend and iShares Future AI 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.