Correlation Between Etho Climate and IShares Russell

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Can any of the company-specific risk be diversified away by investing in both Etho Climate and IShares Russell 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 Etho Climate and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etho Climate Leadership and IShares Russell Mid Cap, you can compare the effects of market volatilities on Etho Climate and IShares Russell 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 Etho Climate with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etho Climate and IShares Russell.

Diversification Opportunities for Etho Climate and IShares Russell

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Etho and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Etho Climate Leadership and IShares Russell Mid-Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Russell Mid-Cap and Etho Climate 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 Etho Climate Leadership are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Russell Mid-Cap has no effect on the direction of Etho Climate i.e., Etho Climate and IShares Russell go up and down completely randomly.

Pair Corralation between Etho Climate and IShares Russell

Given the investment horizon of 90 days Etho Climate is expected to generate 2.25 times less return on investment than IShares Russell. In addition to that, Etho Climate is 1.03 times more volatile than IShares Russell Mid Cap. It trades about 0.04 of its total potential returns per unit of risk. IShares Russell Mid Cap is currently generating about 0.09 per unit of volatility. If you would invest  9,113  in IShares Russell Mid Cap on December 29, 2023 and sell it today you would earn a total of  2,298  from holding IShares Russell Mid Cap or generate 25.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.63%
ValuesDaily Returns

Etho Climate Leadership  vs.  IShares Russell Mid-Cap

 Performance 
       Timeline  
Etho Climate Leadership 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Etho Climate Leadership are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Etho Climate is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
IShares Russell Mid-Cap 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in IShares Russell Mid Cap are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Etho Climate and IShares Russell Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Etho Climate and IShares Russell

The main advantage of trading using opposite Etho Climate and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etho Climate position performs unexpectedly, IShares Russell 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 Russell will offset losses from the drop in IShares Russell's long position.
The idea behind Etho Climate Leadership and IShares Russell Mid Cap 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.
Check out your portfolio center.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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