Correlation Between IShares ESG and ProShares Large

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

Diversification Opportunities for IShares ESG and ProShares Large

0.99

Correlation Coefficient

IShares ESG  ProShares Large

No risk reduction

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

Pair Corralation between IShares ESG and ProShares Large

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.97 times more return on investment than ProShares Large. However, iShares ESG Aware is 1.03 times less risky than ProShares Large. It trades about 0.14 of its potential returns per unit of risk. ProShares Large Cap is currently generating about 0.11 per unit of risk. If you would invest  12,528  in iShares ESG Aware on September 19, 2024 and sell it today you would earn a total of  738.50  from holding iShares ESG Aware or generate 5.89% return on investment over 90 days.

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

iShares ESG Aware  vs.  ProShares Large Cap

iShares ESG Aware

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Large Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares Large is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and ProShares Large

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

The idea behind iShares ESG Aware and ProShares Large Cap 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .