Correlation Between IShares ESG and VictoryShares Discovery

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

Diversification Opportunities for IShares ESG and VictoryShares Discovery

-0.32

Correlation Coefficient

IShares ESG  VictoryShares Discovery

Very good diversification

The 3 months correlation between IShares and VictoryShares is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and VictoryShares Discovery Enhanc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Discovery 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 VictoryShares Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Discovery has no effect on the direction of IShares ESG i.e., IShares ESG and VictoryShares Discovery go up and down completely randomly.

Pair Corralation between IShares ESG and VictoryShares Discovery

Given the investment horizon of 90 days IShares ESG is expected to generate 2.87 times less return on investment than VictoryShares Discovery. But when comparing it to its historical volatility, iShares ESG Aware is 1.03 times less risky than VictoryShares Discovery. It trades about 0.05 of its potential returns per unit of risk. VictoryShares Discovery Enhanced is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,300  in VictoryShares Discovery Enhanced on September 13, 2024 and sell it today you would earn a total of  571.00  from holding VictoryShares Discovery Enhanced or generate 10.77% return on investment over 90 days.

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

iShares ESG Aware  vs.  VictoryShares Discovery Enhanc

iShares ESG Aware

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VictoryShares Discovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares Discovery Enhanced are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, VictoryShares Discovery may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares ESG and VictoryShares Discovery

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

The idea behind iShares ESG Aware and VictoryShares Discovery Enhanced 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.