Correlation Between Main Sector and IShares Climate

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

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

Diversification Opportunities for Main Sector and IShares Climate

0.99

Correlation Coefficient

Main Sector  IShares Climate

No risk reduction

The 3 months correlation between Main and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Main Sector Rotation and iShares Climate Conscious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Climate Conscious and Main Sector 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 Main Sector Rotation are associated (or correlated) with IShares Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Climate Conscious has no effect on the direction of Main Sector i.e., Main Sector and IShares Climate go up and down completely randomly.

Pair Corralation between Main Sector and IShares Climate

Given the investment horizon of 90 days Main Sector Rotation is expected to generate 1.12 times more return on investment than IShares Climate. However, Main Sector is 1.12 times more volatile than iShares Climate Conscious. It trades about 0.05 of its potential returns per unit of risk. iShares Climate Conscious is currently generating about 0.03 per unit of risk. If you would invest  5,986  in Main Sector Rotation on August 24, 2025 and sell it today you would earn a total of  160.00  from holding Main Sector Rotation or generate 2.67% return on investment over 90 days.

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

Main Sector Rotation  vs.  iShares Climate Conscious

Main Sector Rotation

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Main Sector is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Climate Conscious

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Climate Conscious are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, IShares Climate is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Main Sector and IShares Climate

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

The idea behind Main Sector Rotation and iShares Climate Conscious 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.