Correlation Between Sparta Capital and IShares Emergent

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

Diversification Opportunities for Sparta Capital and IShares Emergent

0.22

Correlation Coefficient

Sparta Capital  IShares Emergent

Modest diversification

The 3 months correlation between Sparta and IShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and iShares Emergent Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Emergent Food 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 Emergent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Emergent Food has no effect on the direction of Sparta Capital i.e., Sparta Capital and IShares Emergent go up and down completely randomly.

Pair Corralation between Sparta Capital and IShares Emergent

Assuming the 90 days horizon Sparta Capital is expected to generate 17.51 times more return on investment than IShares Emergent. However, Sparta Capital is 17.51 times more volatile than iShares Emergent Food. It trades about 0.01 of its potential returns per unit of risk. iShares Emergent Food is currently generating about 0.04 per unit of risk. If you would invest  1.03  in Sparta Capital on December 29, 2024 and sell it today you would lose (0.92) from holding Sparta Capital or give up 89.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Sparta Capital  vs.  iShares Emergent Food

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sparta Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Emergent Food

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Sparta Capital and IShares Emergent

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

The idea behind Sparta Capital and iShares Emergent Food 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.