Correlation Between IShares ESG and Simplify Macro

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

Diversification Opportunities for IShares ESG and Simplify Macro

0.57

Correlation Coefficient

IShares ESG  Simplify Macro

Very weak diversification

The 3 months correlation between IShares and Simplify is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Simplify Macro Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Macro Strategy 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 Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Macro Strategy has no effect on the direction of IShares ESG i.e., IShares ESG and Simplify Macro go up and down completely randomly.

Pair Corralation between IShares ESG and Simplify Macro

Given the investment horizon of 90 days iShares ESG Aware is expected to under-perform the Simplify Macro. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Aware is 1.2 times less risky than Simplify Macro. The etf trades about -0.02 of its potential returns per unit of risk. The Simplify Macro Strategy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,074  in Simplify Macro Strategy on October 21, 2024 and sell it today you would earn a total of  52.00  from holding Simplify Macro Strategy or generate 2.51% return on investment over 90 days.

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

iShares ESG Aware  vs.  Simplify Macro Strategy

iShares ESG Aware

Risk-Adjusted Performance

0 of 100

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 basic 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 Macro Strategy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Macro Strategy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Simplify Macro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares ESG and Simplify Macro

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

The idea behind iShares ESG Aware and Simplify Macro Strategy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..