Correlation Between IShares SP and Clarkston Founders

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

By analyzing existing cross correlation between iShares SP 100 and Clarkston Founders, you can compare the effects of market volatilities on IShares SP and Clarkston Founders 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 SP with a short position of Clarkston Founders. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Clarkston Founders.

Diversification Opportunities for IShares SP and Clarkston Founders

0.78

Correlation Coefficient

IShares SP  Clarkston Founders

Poor diversification

The 3 months correlation between IShares and Clarkston is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 100 and Clarkston Founders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarkston Founders and IShares SP 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 SP 100 are associated (or correlated) with Clarkston Founders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarkston Founders has no effect on the direction of IShares SP i.e., IShares SP and Clarkston Founders go up and down completely randomly.

Pair Corralation between IShares SP and Clarkston Founders

Considering the 90-day investment horizon iShares SP 100 is expected to generate 1.19 times more return on investment than Clarkston Founders. However, IShares SP is 1.19 times more volatile than Clarkston Founders. It trades about 0.12 of its potential returns per unit of risk. Clarkston Founders is currently generating about 0.02 per unit of risk. If you would invest  27,363  in iShares SP 100 on September 23, 2024 and sell it today you would earn a total of  1,752  from holding iShares SP 100 or generate 6.4% return on investment over 90 days.

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

iShares SP 100  vs.  Clarkston Founders

iShares SP 100

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 100 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Clarkston Founders

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clarkston Founders are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Clarkston Founders is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares SP and Clarkston Founders

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

The idea behind iShares SP 100 and Clarkston Founders 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.