Correlation Between IShares IBoxx and Nuveen ESG

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

By analyzing existing cross correlation between iShares iBoxx High and Nuveen ESG High, you can compare the effects of market volatilities on IShares IBoxx and Nuveen 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 IBoxx with a short position of Nuveen ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and Nuveen ESG.

Diversification Opportunities for IShares IBoxx and Nuveen ESG

0.98

Correlation Coefficient

IShares IBoxx  Nuveen ESG

Almost no diversification

The 3 months correlation between IShares and Nuveen is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and Nuveen ESG High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen ESG High and IShares IBoxx 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 iBoxx High are associated (or correlated) with Nuveen ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen ESG High has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and Nuveen ESG go up and down completely randomly.

Pair Corralation between IShares IBoxx and Nuveen ESG

Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.08 times less return on investment than Nuveen ESG. But when comparing it to its historical volatility, iShares iBoxx High is 1.22 times less risky than Nuveen ESG. It trades about 0.11 of its potential returns per unit of risk. Nuveen ESG High is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,097  in Nuveen ESG High on December 26, 2024 and sell it today you would earn a total of  38.00  from holding Nuveen ESG High or generate 1.81% return on investment over 90 days.

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

iShares iBoxx High  vs.  Nuveen ESG High

iShares iBoxx High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx High are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nuveen ESG High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares IBoxx and Nuveen ESG

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

The idea behind iShares iBoxx High and Nuveen ESG High 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.