Correlation Between IShares ESG and Inspire Tactical

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

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

Diversification Opportunities for IShares ESG and Inspire Tactical

0.77

Correlation Coefficient

IShares ESG  Inspire Tactical

Poor diversification

The 3 months correlation between IShares and Inspire is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Inspire Tactical Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire Tactical Balanced and IShares ESG 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 ESG Aware are associated (or correlated) with Inspire Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire Tactical Balanced has no effect on the direction of IShares ESG i.e., IShares ESG and Inspire Tactical go up and down completely randomly.

Pair Corralation between IShares ESG and Inspire Tactical

Given the investment horizon of 90 days IShares ESG is expected to generate 1.4 times less return on investment than Inspire Tactical. But when comparing it to its historical volatility, iShares ESG Aware is 1.31 times less risky than Inspire Tactical. It trades about 0.15 of its potential returns per unit of risk. Inspire Tactical Balanced is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,643  in Inspire Tactical Balanced on September 1, 2024 and sell it today you would earn a total of  190.00  from holding Inspire Tactical Balanced or generate 7.19% return on investment over 90 days.

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

iShares ESG Aware  vs.  Inspire Tactical Balanced

iShares ESG Aware

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Inspire Tactical Balanced

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire Tactical Balanced are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Inspire Tactical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IShares ESG and Inspire Tactical

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

The idea behind iShares ESG Aware and Inspire Tactical Balanced 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.