Correlation Between IShares ESG and Brompton Enhanced

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

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

Diversification Opportunities for IShares ESG and Brompton Enhanced

0.94

Correlation Coefficient

IShares ESG  Brompton Enhanced

Almost no diversification

The 3 months correlation between IShares and Brompton is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Growth and Brompton Enhanced Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Enhanced Multi 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 Growth are associated (or correlated) with Brompton Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Enhanced Multi has no effect on the direction of IShares ESG i.e., IShares ESG and Brompton Enhanced go up and down completely randomly.

Pair Corralation between IShares ESG and Brompton Enhanced

Assuming the 90 days trading horizon iShares ESG Growth is expected to generate 0.8 times more return on investment than Brompton Enhanced. However, iShares ESG Growth is 1.25 times less risky than Brompton Enhanced. It trades about 0.22 of its potential returns per unit of risk. Brompton Enhanced Multi Asset is currently generating about 0.1 per unit of risk. If you would invest  5,518  in iShares ESG Growth on September 15, 2024 and sell it today you would earn a total of  388.00  from holding iShares ESG Growth or generate 7.03% return on investment over 90 days.

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

iShares ESG Growth  vs.  Brompton Enhanced Multi Asset

iShares ESG Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Growth are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brompton Enhanced Multi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Enhanced Multi Asset are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Brompton Enhanced 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 Brompton Enhanced

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

The idea behind iShares ESG Growth and Brompton Enhanced Multi Asset 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.