Correlation Between BetaPro NASDAQ and IShares ESG

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

By analyzing existing cross correlation between BetaPro NASDAQ 100 2x and iShares ESG Conservative, you can compare the effects of market volatilities on BetaPro NASDAQ 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 BetaPro NASDAQ with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BetaPro NASDAQ and IShares ESG.

Diversification Opportunities for BetaPro NASDAQ and IShares ESG

-0.4

Correlation Coefficient

BetaPro NASDAQ  IShares ESG

Very good diversification

The 3 months correlation between BetaPro and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro NASDAQ 100 2x 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 BetaPro NASDAQ 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 BetaPro NASDAQ 100 2x 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 BetaPro NASDAQ i.e., BetaPro NASDAQ and IShares ESG go up and down completely randomly.

Pair Corralation between BetaPro NASDAQ and IShares ESG

Assuming the 90 days trading horizon BetaPro NASDAQ 100 2x is expected to generate 4.44 times more return on investment than IShares ESG. However, BetaPro NASDAQ is 4.44 times more volatile than iShares ESG Conservative. It trades about 0.08 of its potential returns per unit of risk. iShares ESG Conservative is currently generating about -0.02 per unit of risk. If you would invest  1,045  in BetaPro NASDAQ 100 2x on December 31, 2024 and sell it today you would earn a total of  119.00  from holding BetaPro NASDAQ 100 2x or generate 11.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

BetaPro NASDAQ 100 2x  vs.  iShares ESG Conservative

BetaPro NASDAQ 100

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro NASDAQ 100 2x are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, BetaPro NASDAQ displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares ESG Conservative

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Conservative 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.

Pair Trading with BetaPro NASDAQ and IShares ESG

The main advantage of trading using opposite BetaPro NASDAQ and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro NASDAQ 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 BetaPro NASDAQ 100 2x 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.