Correlation Between IShares ESG and Vanguard All

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

Diversification Opportunities for IShares ESG and Vanguard All

0.81

Correlation Coefficient

IShares ESG  Vanguard All

Very poor diversification

The 3 months correlation between IShares and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Growth and Vanguard All Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard All Equity 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 Vanguard All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard All Equity has no effect on the direction of IShares ESG i.e., IShares ESG and Vanguard All go up and down completely randomly.

Pair Corralation between IShares ESG and Vanguard All

Assuming the 90 days trading horizon IShares ESG is expected to generate 1.99 times less return on investment than Vanguard All. In addition to that, IShares ESG is 1.05 times more volatile than Vanguard All Equity ETF. It trades about 0.07 of its total potential returns per unit of risk. Vanguard All Equity ETF is currently generating about 0.14 per unit of volatility. If you would invest  4,430  in Vanguard All Equity ETF on October 26, 2024 and sell it today you would earn a total of  254.00  from holding Vanguard All Equity ETF or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

iShares ESG Growth  vs.  Vanguard All Equity ETF

iShares ESG Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Growth are ranked lower than 5 (%) 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.

Vanguard All Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard All Equity ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard All 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 Vanguard All

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

The idea behind iShares ESG Growth and Vanguard All Equity ETF 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.