Correlation Between Main Sector and Inspire International

Can any of the company-specific risk be diversified away by investing in both Main Sector and Inspire International 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 Inspire International 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 Inspire International ESG, you can compare the effects of market volatilities on Main Sector and Inspire International 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 Inspire International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Sector and Inspire International.

Diversification Opportunities for Main Sector and Inspire International

0.98

Correlation Coefficient

Main Sector  Inspire International

Almost no diversification

The 3 months correlation between Main and Inspire is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Main Sector Rotation and Inspire International ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspire International ESG 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 Inspire International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspire International ESG has no effect on the direction of Main Sector i.e., Main Sector and Inspire International go up and down completely randomly.

Pair Corralation between Main Sector and Inspire International

Given the investment horizon of 90 days Main Sector Rotation is expected to generate 1.2 times more return on investment than Inspire International. However, Main Sector is 1.2 times more volatile than Inspire International ESG. It trades about 0.06 of its potential returns per unit of risk. Inspire International ESG is currently generating about 0.06 per unit of risk. If you would invest  4,312  in Main Sector Rotation on May 1, 2025 and sell it today you would earn a total of  1,621  from holding Main Sector Rotation or generate 37.59% 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.  Inspire International ESG

Main Sector Rotation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Main Sector Rotation are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Main Sector unveiled solid returns over the last few months and may actually be approaching a breakup point.

Inspire International ESG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inspire International ESG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking indicators, Inspire International may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Main Sector and Inspire International

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

The idea behind Main Sector Rotation and Inspire International ESG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.