Correlation Between Sparta Capital and IShares ESG

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

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

Diversification Opportunities for Sparta Capital and IShares ESG

-0.51

Correlation Coefficient

Sparta Capital  IShares ESG

Excellent diversification

The 3 months correlation between Sparta and IShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced and Sparta Capital 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 Sparta Capital are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of Sparta Capital i.e., Sparta Capital and IShares ESG go up and down completely randomly.

Pair Corralation between Sparta Capital and IShares ESG

Assuming the 90 days horizon Sparta Capital is expected to generate 30.31 times more return on investment than IShares ESG. However, Sparta Capital is 30.31 times more volatile than iShares ESG Advanced. It trades about 0.03 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.09 per unit of risk. If you would invest  1.10  in Sparta Capital on October 11, 2024 and sell it today you would lose (0.07) from holding Sparta Capital or give up 6.36% of portfolio value over 90 days.

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

Sparta Capital  vs.  iShares ESG Advanced

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

iShares ESG Advanced

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sparta Capital and IShares ESG

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

The idea behind Sparta Capital and iShares ESG Advanced 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.