Correlation Between IShares ESG and IShares Global

Can any of the company-specific risk be diversified away by investing in both IShares ESG and IShares Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares ESG MSCI and iShares Global REIT, you can compare the effects of market volatilities on IShares ESG and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares Global.

Diversification Opportunities for IShares ESG and IShares Global

0.24

Correlation Coefficient

IShares ESG  IShares Global

Modest diversification

The 3 months correlation between IShares and IShares is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG MSCI and iShares Global REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global REIT 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 MSCI are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global REIT has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Global go up and down completely randomly.

Pair Corralation between IShares ESG and IShares Global

Given the investment horizon of 90 days iShares ESG MSCI is expected to generate 0.58 times more return on investment than IShares Global. However, iShares ESG MSCI is 1.72 times less risky than IShares Global. It trades about -0.42 of its potential returns per unit of risk. iShares Global REIT is currently generating about -0.36 per unit of risk. If you would invest  2,955  in iShares ESG MSCI on September 24, 2024 and sell it today you would lose (155.20) from holding iShares ESG MSCI or give up 5.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

iShares ESG MSCI  vs.  iShares Global REIT

iShares ESG MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, IShares ESG is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Global REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with IShares ESG and IShares Global

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

The idea behind iShares ESG MSCI and iShares Global REIT 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.