Correlation Between IShares Smart and CIMB SP

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

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

Diversification Opportunities for IShares Smart and CIMB SP

0.48

Correlation Coefficient

IShares Smart  CIMB SP

Very weak diversification

The 3 months correlation between IShares and CIMB is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Smart City and CIMB SP Ethical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB SP Ethical and IShares Smart 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 Smart City are associated (or correlated) with CIMB SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB SP Ethical has no effect on the direction of IShares Smart i.e., IShares Smart and CIMB SP go up and down completely randomly.

Pair Corralation between IShares Smart and CIMB SP

Assuming the 90 days trading horizon iShares Smart City is expected to generate 0.82 times more return on investment than CIMB SP. However, iShares Smart City is 1.22 times less risky than CIMB SP. It trades about 0.09 of its potential returns per unit of risk. CIMB SP Ethical is currently generating about -0.16 per unit of risk. If you would invest  739.00  in iShares Smart City on September 17, 2024 and sell it today you would earn a total of  24.00  from holding iShares Smart City or generate 3.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

iShares Smart City  vs.  CIMB SP Ethical

iShares Smart City

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Smart City are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, IShares Smart may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CIMB SP Ethical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CIMB SP Ethical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CIMB SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Smart and CIMB SP

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

The idea behind iShares Smart City and CIMB SP Ethical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.