Correlation Between VictoryShares THB and IShares Environmental

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

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

Diversification Opportunities for VictoryShares THB and IShares Environmental

0.84

Correlation Coefficient

VictoryShares THB  IShares Environmental

Very poor diversification

The 3 months correlation between VictoryShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares THB Mid and iShares Environmental Infrastr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Environmental and VictoryShares THB 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 VictoryShares THB Mid are associated (or correlated) with IShares Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Environmental has no effect on the direction of VictoryShares THB i.e., VictoryShares THB and IShares Environmental go up and down completely randomly.

Pair Corralation between VictoryShares THB and IShares Environmental

Given the investment horizon of 90 days VictoryShares THB Mid is expected to under-perform the IShares Environmental. In addition to that, VictoryShares THB is 1.07 times more volatile than iShares Environmental Infrastructure. It trades about -0.35 of its total potential returns per unit of risk. iShares Environmental Infrastructure is currently generating about -0.37 per unit of volatility. If you would invest  3,239  in iShares Environmental Infrastructure on October 8, 2024 and sell it today you would lose (198.00) from holding iShares Environmental Infrastructure or give up 6.11% of portfolio value over 90 days.

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

VictoryShares THB Mid  vs.  iShares Environmental Infrastr

VictoryShares THB Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VictoryShares THB Mid has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, VictoryShares THB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Environmental Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VictoryShares THB and IShares Environmental

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

The idea behind VictoryShares THB Mid and iShares Environmental Infrastructure 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.