Correlation Between Main Thematic and IShares Trust

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

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

Diversification Opportunities for Main Thematic and IShares Trust

-0.54

Correlation Coefficient

Main Thematic  IShares Trust

Excellent diversification

The 3 months correlation between Main and IShares is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Main Thematic Innovation and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Main Thematic 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 Main Thematic Innovation are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Main Thematic i.e., Main Thematic and IShares Trust go up and down completely randomly.

Pair Corralation between Main Thematic and IShares Trust

Given the investment horizon of 90 days Main Thematic Innovation is expected to generate 6.39 times more return on investment than IShares Trust. However, Main Thematic is 6.39 times more volatile than iShares Trust . It trades about 0.1 of its potential returns per unit of risk. iShares Trust is currently generating about 0.02 per unit of risk. If you would invest  1,695  in Main Thematic Innovation on September 21, 2024 and sell it today you would earn a total of  385.00  from holding Main Thematic Innovation or generate 22.71% return on investment over 90 days.

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

Main Thematic Innovation  vs.  iShares Trust

Main Thematic Innovation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Thematic Innovation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Main Thematic unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, IShares Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Main Thematic and IShares Trust

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

The idea behind Main Thematic Innovation and iShares Trust 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.