Correlation Between IShares Fundamental and Topicus

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

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

Diversification Opportunities for IShares Fundamental and Topicus

-0.44

Correlation Coefficient

IShares Fundamental  Topicus

Very good diversification

The 3 months correlation between IShares and Topicus is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus and IShares Fundamental 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 Fundamental Hedged are associated (or correlated) with Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Topicus go up and down completely randomly.

Pair Corralation between IShares Fundamental and Topicus

Assuming the 90 days trading horizon iShares Fundamental Hedged is expected to generate 0.44 times more return on investment than Topicus. However, iShares Fundamental Hedged is 2.26 times less risky than Topicus. It trades about 0.02 of its potential returns per unit of risk. Topicus is currently generating about -0.09 per unit of risk. If you would invest  5,398  in iShares Fundamental Hedged on September 25, 2024 and sell it today you would earn a total of  46.00  from holding iShares Fundamental Hedged or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

iShares Fundamental Hedged  vs.  Topicus

iShares Fundamental

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with IShares Fundamental and Topicus

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

The idea behind iShares Fundamental Hedged and Topicus 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.