Correlation Between IShares Global and Evolve Cyber

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

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

Diversification Opportunities for IShares Global and Evolve Cyber

0.63

Correlation Coefficient

IShares Global  Evolve Cyber

Poor diversification

The 3 months correlation between IShares and Evolve is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Healthcare and Evolve Cyber Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolve Cyber Security and IShares Global 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 Global Healthcare are associated (or correlated) with Evolve Cyber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolve Cyber Security has no effect on the direction of IShares Global i.e., IShares Global and Evolve Cyber go up and down completely randomly.

Pair Corralation between IShares Global and Evolve Cyber

Assuming the 90 days trading horizon iShares Global Healthcare is expected to generate 0.47 times more return on investment than Evolve Cyber. However, iShares Global Healthcare is 2.11 times less risky than Evolve Cyber. It trades about 0.1 of its potential returns per unit of risk. Evolve Cyber Security is currently generating about 0.01 per unit of risk. If you would invest  6,481  in iShares Global Healthcare on December 30, 2024 and sell it today you would earn a total of  285.00  from holding iShares Global Healthcare or generate 4.4% return on investment over 90 days.

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

iShares Global Healthcare  vs.  Evolve Cyber Security

iShares Global Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Healthcare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, IShares Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Evolve Cyber Security

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolve Cyber Security has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Evolve Cyber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and Evolve Cyber

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

The idea behind iShares Global Healthcare and Evolve Cyber Security 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.