Correlation Between IShares Corp and LG Clean

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Can any of the company-specific risk be diversified away by investing in both IShares Corp and LG Clean 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 Corp and LG Clean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Corp Bond and LG Clean Energy, you can compare the effects of market volatilities on IShares Corp and LG Clean 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 Corp with a short position of LG Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Corp and LG Clean.

Diversification Opportunities for IShares Corp and LG Clean

ISharesRENWDiversified AwayISharesRENWDiversified Away100%
-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between IShares and RENW is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding iShares Corp Bond and LG Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Clean Energy and IShares Corp 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 Corp Bond are associated (or correlated) with LG Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Clean Energy has no effect on the direction of IShares Corp i.e., IShares Corp and LG Clean go up and down completely randomly.

Pair Corralation between IShares Corp and LG Clean

Assuming the 90 days trading horizon iShares Corp Bond is expected to under-perform the LG Clean. But the etf apears to be less risky and, when comparing its historical volatility, iShares Corp Bond is 1.7 times less risky than LG Clean. The etf trades about -0.02 of its potential returns per unit of risk. The LG Clean Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  834.00  in LG Clean Energy on October 21, 2024 and sell it today you would earn a total of  4.00  from holding LG Clean Energy or generate 0.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.33%
ValuesDaily Returns

iShares Corp Bond  vs.  LG Clean Energy

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -8-6-4-202
JavaScript chart by amCharts 3.21.15IEBB RENW
       Timeline  
iShares Corp Bond 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares Corp Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IShares Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan4.784.84.824.844.864.884.94.92
LG Clean Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LG Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, LG Clean is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

IShares Corp and LG Clean Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.36-1.0-0.64-0.28-0.005750.240.60.961.321.68 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15IEBB RENW
       Returns  

Pair Trading with IShares Corp and LG Clean

The main advantage of trading using opposite IShares Corp and LG Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Corp position performs unexpectedly, LG Clean 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 LG Clean will offset losses from the drop in LG Clean's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against IShares Corp as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. IShares Corp's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, IShares Corp's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to iShares Corp Bond.
The idea behind iShares Corp Bond and LG Clean Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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