Correlation Between Themes RD and IShares Dividend

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

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

Diversification Opportunities for Themes RD and IShares Dividend

0.89

Correlation Coefficient

Themes RD  IShares Dividend

Very poor diversification

The 3 months correlation between Themes and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Themes RD Champions and iShares Dividend and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dividend and Themes RD 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 Themes RD Champions are associated (or correlated) with IShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dividend has no effect on the direction of Themes RD i.e., Themes RD and IShares Dividend go up and down completely randomly.

Pair Corralation between Themes RD and IShares Dividend

Given the investment horizon of 90 days Themes RD Champions is expected to generate 82.66 times more return on investment than IShares Dividend. However, Themes RD is 82.66 times more volatile than iShares Dividend and. It trades about 0.07 of its potential returns per unit of risk. iShares Dividend and is currently generating about 0.09 per unit of risk. If you would invest  0.00  in Themes RD Champions on September 4, 2024 and sell it today you would earn a total of  3,201  from holding Themes RD Champions or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	49.7%
Values	Daily Returns

Themes RD Champions  vs.  iShares Dividend and

Themes RD Champions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Themes RD Champions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Themes RD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Dividend

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Dividend and are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, IShares Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Themes RD and IShares Dividend

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

The idea behind Themes RD Champions and iShares Dividend and 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.