Correlation Between IShares ESG and Democracy International

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

Diversification Opportunities for IShares ESG and Democracy International

0.76

Correlation Coefficient

IShares ESG  Democracy International

Poor diversification

The 3 months correlation between IShares and Democracy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Democracy International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Democracy International 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 Democracy International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Democracy International has no effect on the direction of IShares ESG i.e., IShares ESG and Democracy International go up and down completely randomly.

Pair Corralation between IShares ESG and Democracy International

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 1.04 times more return on investment than Democracy International. However, IShares ESG is 1.04 times more volatile than Democracy International. It trades about 0.19 of its potential returns per unit of risk. Democracy International is currently generating about 0.14 per unit of risk. If you would invest  7,603  in iShares ESG Aware on December 21, 2024 and sell it today you would earn a total of  759.00  from holding iShares ESG Aware or generate 9.98% 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.  Democracy International

iShares ESG Aware

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Democracy International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Democracy International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Democracy International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares ESG and Democracy International

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

The idea behind iShares ESG Aware and Democracy International 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.