Correlation Between IShares ESG and IShares Cybersecurity

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

Diversification Opportunities for IShares ESG and IShares Cybersecurity

0.67

Correlation Coefficient

IShares ESG  IShares Cybersecurity

Poor diversification

The 3 months correlation between IShares and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and iShares Cybersecurity and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Cybersecurity and 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 Cybersecurity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Cybersecurity and has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Cybersecurity go up and down completely randomly.

Pair Corralation between IShares ESG and IShares Cybersecurity

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 0.65 times more return on investment than IShares Cybersecurity. However, iShares ESG Aware is 1.55 times less risky than IShares Cybersecurity. It trades about -0.04 of its potential returns per unit of risk. iShares Cybersecurity and is currently generating about -0.09 per unit of risk. If you would invest  3,048  in iShares ESG Aware on December 4, 2024 and sell it today you would lose (57.00) from holding iShares ESG Aware or give up 1.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

iShares ESG Aware  vs.  iShares Cybersecurity and

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 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.

iShares Cybersecurity and

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Cybersecurity and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with IShares ESG and IShares Cybersecurity

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

The idea behind iShares ESG Aware and iShares Cybersecurity and 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.