Correlation Between IShares Basic and Themes Copper

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

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

Diversification Opportunities for IShares Basic and Themes Copper

0.73

Correlation Coefficient

IShares Basic  Themes Copper

Poor diversification

The 3 months correlation between IShares and Themes is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and Themes Copper Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Copper Miners and IShares Basic 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 Basic Materials are associated (or correlated) with Themes Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Copper Miners has no effect on the direction of IShares Basic i.e., IShares Basic and Themes Copper go up and down completely randomly.

Pair Corralation between IShares Basic and Themes Copper

Considering the 90-day investment horizon iShares Basic Materials is expected to generate 0.4 times more return on investment than Themes Copper. However, iShares Basic Materials is 2.5 times less risky than Themes Copper. It trades about 0.02 of its potential returns per unit of risk. Themes Copper Miners is currently generating about -0.05 per unit of risk. If you would invest  14,577  in iShares Basic Materials on August 30, 2024 and sell it today you would earn a total of  114.00  from holding iShares Basic Materials or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.44%
Values	Daily Returns

iShares Basic Materials  vs.  Themes Copper Miners

iShares Basic Materials

Risk-Adjusted Performance

1 of 100

Weak

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

Themes Copper Miners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Themes Copper Miners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Basic and Themes Copper

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

The idea behind iShares Basic Materials and Themes Copper Miners 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .