Correlation Between BlackRock Carbon and IShares ESG

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

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

Diversification Opportunities for BlackRock Carbon and IShares ESG

0.94

Correlation Coefficient

BlackRock Carbon  IShares ESG

Almost no diversification

The 3 months correlation between BlackRock and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Carbon Transition and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and BlackRock Carbon 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 BlackRock Carbon Transition 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 Aware has no effect on the direction of BlackRock Carbon i.e., BlackRock Carbon and IShares ESG go up and down completely randomly.

Pair Corralation between BlackRock Carbon and IShares ESG

Given the investment horizon of 90 days BlackRock Carbon Transition is expected to generate 1.0 times more return on investment than IShares ESG. However, BlackRock Carbon is 1.0 times more volatile than iShares ESG Aware. It trades about -0.09 of its potential returns per unit of risk. iShares ESG Aware is currently generating about -0.09 per unit of risk. If you would invest  6,416  in BlackRock Carbon Transition on December 29, 2024 and sell it today you would lose (381.00) from holding BlackRock Carbon Transition or give up 5.94% of portfolio value over 90 days.

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

BlackRock Carbon Transition  vs.  iShares ESG Aware

BlackRock Carbon Tra

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Carbon Transition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Carbon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares ESG Aware

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares ESG Aware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BlackRock Carbon and IShares ESG

The main advantage of trading using opposite BlackRock Carbon and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock Carbon 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 BlackRock Carbon Transition and iShares ESG Aware 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.