Correlation Between BlackRock ESG and Vanguard FTSE

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

By analyzing existing cross correlation between BlackRock ESG Multi Asset and Vanguard FTSE Developed, you can compare the effects of market volatilities on BlackRock ESG and Vanguard FTSE 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 ESG with a short position of Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock ESG and Vanguard FTSE.

Diversification Opportunities for BlackRock ESG and Vanguard FTSE

0.2

Correlation Coefficient

BlackRock ESG  Vanguard FTSE

Modest diversification

The 3 months correlation between BlackRock and Vanguard is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock ESG Multi Asset and Vanguard FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE Developed and BlackRock 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 BlackRock ESG Multi Asset are associated (or correlated) with Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE Developed has no effect on the direction of BlackRock ESG i.e., BlackRock ESG and Vanguard FTSE go up and down completely randomly.

Pair Corralation between BlackRock ESG and Vanguard FTSE

Assuming the 90 days trading horizon BlackRock ESG is expected to generate 21.49 times less return on investment than Vanguard FTSE. But when comparing it to its historical volatility, BlackRock ESG Multi Asset is 3.42 times less risky than Vanguard FTSE. It trades about 0.03 of its potential returns per unit of risk. Vanguard FTSE Developed is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,678  in Vanguard FTSE Developed on December 26, 2024 and sell it today you would earn a total of  628.00  from holding Vanguard FTSE Developed or generate 13.42% return on investment over 90 days.

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

BlackRock ESG Multi Asset  vs.  Vanguard FTSE Developed

BlackRock ESG Multi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock ESG Multi Asset are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, BlackRock ESG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vanguard FTSE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock ESG and Vanguard FTSE

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

The idea behind BlackRock ESG Multi Asset and Vanguard FTSE Developed 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.