Correlation Between IShares Equity and Renaissance Europe

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

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

Diversification Opportunities for IShares Equity and Renaissance Europe

0.39

Correlation Coefficient

IShares Equity  Renaissance Europe

Weak diversification

The 3 months correlation between IShares and Renaissance is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Equity Enhanced and Renaissance Europe C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renaissance Europe and IShares Equity 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 iShares Equity Enhanced are associated (or correlated) with Renaissance Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renaissance Europe has no effect on the direction of IShares Equity i.e., IShares Equity and Renaissance Europe go up and down completely randomly.

Pair Corralation between IShares Equity and Renaissance Europe

Assuming the 90 days trading horizon iShares Equity Enhanced is expected to under-perform the Renaissance Europe. In addition to that, IShares Equity is 1.3 times more volatile than Renaissance Europe C. It trades about -0.1 of its total potential returns per unit of risk. Renaissance Europe C is currently generating about 0.01 per unit of volatility. If you would invest  26,194  in Renaissance Europe C on December 27, 2024 and sell it today you would earn a total of  95.00  from holding Renaissance Europe C or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

iShares Equity Enhanced  vs.  Renaissance Europe C

iShares Equity Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Equity Enhanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Renaissance Europe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Renaissance Europe C has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Renaissance Europe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Equity and Renaissance Europe

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

The idea behind iShares Equity Enhanced and Renaissance Europe C 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.