Correlation Between IShares ESG and Simplify Equity

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

Diversification Opportunities for IShares ESG and Simplify Equity

0.99

Correlation Coefficient

IShares ESG  Simplify Equity

No risk reduction

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

Pair Corralation between IShares ESG and Simplify Equity

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.72 times more return on investment than Simplify Equity. However, iShares ESG Aware is 1.39 times less risky than Simplify Equity. It trades about -0.09 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about -0.08 per unit of risk. If you would invest  13,039  in iShares ESG Aware on December 21, 2024 and sell it today you would lose (719.00) from holding iShares ESG Aware or give up 5.51% of portfolio value over 90 days.

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

iShares ESG Aware  vs.  Simplify Equity PLUS

iShares ESG Aware

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Aware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Simplify Equity PLUS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Equity PLUS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with IShares ESG and Simplify Equity

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

The idea behind iShares ESG Aware and Simplify Equity PLUS 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 Transaction History module to view history of all your transactions and understand their impact on performance.