Correlation Between IShares Environmental and IShares Infrastructure

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

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

Diversification Opportunities for IShares Environmental and IShares Infrastructure

0.25

Correlation Coefficient

IShares Environmental  IShares Infrastructure

Modest diversification

The 3 months correlation between IShares and IShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares Environmental Infrastr and iShares Infrastructure ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Infrastructure and IShares Environmental 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 Environmental Infrastructure are associated (or correlated) with IShares Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Infrastructure has no effect on the direction of IShares Environmental i.e., IShares Environmental and IShares Infrastructure go up and down completely randomly.

Pair Corralation between IShares Environmental and IShares Infrastructure

Given the investment horizon of 90 days iShares Environmental Infrastructure is expected to under-perform the IShares Infrastructure. But the etf apears to be less risky and, when comparing its historical volatility, iShares Environmental Infrastructure is 1.42 times less risky than IShares Infrastructure. The etf trades about -0.16 of its potential returns per unit of risk. The iShares Infrastructure ETF is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,628  in iShares Infrastructure ETF on September 26, 2024 and sell it today you would earn a total of  45.00  from holding iShares Infrastructure ETF or generate 0.97% return on investment over 90 days.

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

iShares Environmental Infrastr  vs.  iShares Infrastructure ETF

iShares Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Environmental Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

iShares Infrastructure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Infrastructure ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Infrastructure is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Environmental and IShares Infrastructure

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

The idea behind iShares Environmental Infrastructure and iShares Infrastructure ETF 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.