Correlation Between IShares ESG and WisdomTree Voya

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

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

Diversification Opportunities for IShares ESG and WisdomTree Voya

0.99

Correlation Coefficient

IShares ESG  WisdomTree Voya

No risk reduction

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

Pair Corralation between IShares ESG and WisdomTree Voya

Given the investment horizon of 90 days IShares ESG is expected to generate 1.53 times less return on investment than WisdomTree Voya. In addition to that, IShares ESG is 1.22 times more volatile than WisdomTree Voya Yield. It trades about 0.02 of its total potential returns per unit of risk. WisdomTree Voya Yield is currently generating about 0.04 per unit of volatility. If you would invest  4,538  in WisdomTree Voya Yield on October 7, 2024 and sell it today you would earn a total of  261.00  from holding WisdomTree Voya Yield or generate 5.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.98%
Values	Daily Returns

iShares ESG Aggregate  vs.  WisdomTree Voya Yield

iShares ESG Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WisdomTree Voya Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Voya Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, WisdomTree Voya 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 ESG and WisdomTree Voya

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

The idea behind iShares ESG Aggregate and WisdomTree Voya Yield 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.