Correlation Between IShares ESG and IShares ESG

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

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

Diversification Opportunities for IShares ESG and IShares ESG

0.7

Correlation Coefficient

IShares ESG  IShares ESG

Poor diversification

The 3 months correlation between IShares and IShares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Balanced and iShares ESG Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Conservative 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 Balanced are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Conservative has no effect on the direction of IShares ESG i.e., IShares ESG and IShares ESG go up and down completely randomly.

Pair Corralation between IShares ESG and IShares ESG

Assuming the 90 days trading horizon iShares ESG Balanced is expected to under-perform the IShares ESG. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Balanced is 1.13 times less risky than IShares ESG. The etf trades about -0.01 of its potential returns per unit of risk. The iShares ESG Conservative is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,532  in iShares ESG Conservative on December 1, 2024 and sell it today you would earn a total of  43.00  from holding iShares ESG Conservative or generate 0.95% return on investment over 90 days.

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

iShares ESG Balanced  vs.  iShares ESG Conservative

iShares ESG Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Balanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares ESG Conservative

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Conservative are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and IShares ESG

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

The idea behind iShares ESG Balanced and iShares ESG Conservative 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.