Correlation Between IShares ESG and IShares Evolved

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

Diversification Opportunities for IShares ESG and IShares Evolved

0.85

Correlation Coefficient

IShares ESG  IShares Evolved

Very poor diversification

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

Pair Corralation between IShares ESG and IShares Evolved

Given the investment horizon of 90 days iShares ESG Aware is expected to under-perform the IShares Evolved. In addition to that, IShares ESG is 1.27 times more volatile than iShares Evolved Discretionary. It trades about -0.32 of its total potential returns per unit of risk. iShares Evolved Discretionary is currently generating about -0.15 per unit of volatility. If you would invest  5,574  in iShares Evolved Discretionary on September 30, 2024 and sell it today you would lose (153.00) from holding iShares Evolved Discretionary or give up 2.74% of portfolio value over 90 days.

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

iShares ESG Aware  vs.  iShares Evolved Discretionary

iShares ESG Aware

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, IShares ESG is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

iShares Evolved Disc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Evolved Discretionary are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, IShares Evolved is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares ESG and IShares Evolved

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

The idea behind iShares ESG Aware and iShares Evolved Discretionary 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.