Correlation Between IShares ESG and Cabana Target

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

By analyzing existing cross correlation between iShares ESG Aware and Cabana Target Drawdown, you can compare the effects of market volatilities on IShares ESG and Cabana Target 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 Cabana Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Cabana Target.

Diversification Opportunities for IShares ESG and Cabana Target

0.68

Correlation Coefficient

IShares ESG  Cabana Target

Poor diversification

The 3 months correlation between IShares and Cabana is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Cabana Target Drawdown in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabana Target Drawdown 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 Aware are associated (or correlated) with Cabana Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabana Target Drawdown has no effect on the direction of IShares ESG i.e., IShares ESG and Cabana Target go up and down completely randomly.

Pair Corralation between IShares ESG and Cabana Target

Given the investment horizon of 90 days IShares ESG is expected to generate 4.46 times less return on investment than Cabana Target. In addition to that, IShares ESG is 1.39 times more volatile than Cabana Target Drawdown. It trades about 0.02 of its total potential returns per unit of risk. Cabana Target Drawdown is currently generating about 0.12 per unit of volatility. If you would invest  2,162  in Cabana Target Drawdown on December 20, 2024 and sell it today you would earn a total of  64.00  from holding Cabana Target Drawdown or generate 2.96% return on investment over 90 days.

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

iShares ESG Aware  vs.  Cabana Target Drawdown

iShares ESG Aware

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Cabana Target Drawdown

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cabana Target Drawdown are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cabana Target is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and Cabana Target

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

The idea behind iShares ESG Aware and Cabana Target Drawdown 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.