Correlation Between IShares ESG and Harbor Dividend

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

Diversification Opportunities for IShares ESG and Harbor Dividend

0.85

Correlation Coefficient

IShares ESG  Harbor Dividend

Very poor diversification

The 3 months correlation between IShares and Harbor is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Harbor Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Dividend Growth 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 Harbor Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Dividend Growth has no effect on the direction of IShares ESG i.e., IShares ESG and Harbor Dividend go up and down completely randomly.

Pair Corralation between IShares ESG and Harbor Dividend

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.92 times more return on investment than Harbor Dividend. However, iShares ESG Aware is 1.08 times less risky than Harbor Dividend. It trades about 0.22 of its potential returns per unit of risk. Harbor Dividend Growth is currently generating about 0.13 per unit of risk. If you would invest  12,044  in iShares ESG Aware on September 4, 2024 and sell it today you would earn a total of  1,245  from holding iShares ESG Aware or generate 10.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares ESG Aware  vs.  Harbor Dividend Growth

iShares ESG Aware

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harbor Dividend Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Dividend Growth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Harbor Dividend may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares ESG and Harbor Dividend

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

The idea behind iShares ESG Aware and Harbor Dividend Growth 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.