Correlation Between Inspire International and Two Roads

Can any of the company-specific risk be diversified away by investing in both Inspire International and Two Roads 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 Inspire International and Two Roads into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inspire International ESG and Two Roads Shared, you can compare the effects of market volatilities on Inspire International and Two Roads 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 Inspire International with a short position of Two Roads. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inspire International and Two Roads.

Diversification Opportunities for Inspire International and Two Roads

0.45

Correlation Coefficient

Inspire International  Two Roads

Very weak diversification

The 3 months correlation between Inspire and Two is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Inspire International ESG and Two Roads Shared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Roads Shared and Inspire International 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 Inspire International ESG are associated (or correlated) with Two Roads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Roads Shared has no effect on the direction of Inspire International i.e., Inspire International and Two Roads go up and down completely randomly.

Pair Corralation between Inspire International and Two Roads

Given the investment horizon of 90 days Inspire International ESG is expected to generate 0.81 times more return on investment than Two Roads. However, Inspire International ESG is 1.24 times less risky than Two Roads. It trades about 0.06 of its potential returns per unit of risk. Two Roads Shared is currently generating about -0.13 per unit of risk. If you would invest  3,006  in Inspire International ESG on November 28, 2024 and sell it today you would earn a total of  77.00  from holding Inspire International ESG or generate 2.56% return on investment over 90 days.

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

Inspire International ESG  vs.  Two Roads Shared

Inspire International ESG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire International ESG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Inspire International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Two Roads Shared

Risk-Adjusted Performance

Very Weak

Over the last 90 days Two Roads Shared has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Inspire International and Two Roads

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

The idea behind Inspire International ESG and Two Roads Shared 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.