Correlation Between Freedom Day and IShares Energy

Can any of the company-specific risk be diversified away by investing in both Freedom Day and IShares Energy 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 Energy 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 Energy Storage, you can compare the effects of market volatilities on Freedom Day and IShares Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and IShares Energy.

Diversification Opportunities for Freedom Day and IShares Energy

0.38

Correlation Coefficient

Freedom Day  IShares Energy

Weak diversification

The 3 months correlation between Freedom and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and iShares Energy Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy Storage 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy Storage has no effect on the direction of Freedom Day i.e., Freedom Day and IShares Energy go up and down completely randomly.

Pair Corralation between Freedom Day and IShares Energy

Given the investment horizon of 90 days Freedom Day Dividend is expected to generate 0.62 times more return on investment than IShares Energy. However, Freedom Day Dividend is 1.62 times less risky than IShares Energy. It trades about 0.04 of its potential returns per unit of risk. iShares Energy Storage is currently generating about -0.03 per unit of risk. If you would invest  3,280  in Freedom Day Dividend on December 29, 2024 and sell it today you would earn a total of  56.00  from holding Freedom Day Dividend or generate 1.71% return on investment over 90 days.

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

Freedom Day Dividend  vs.  iShares Energy Storage

Freedom Day Dividend

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Energy Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Energy Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Freedom Day and IShares Energy

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

The idea behind Freedom Day Dividend and iShares Energy Storage 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.