Correlation Between Mackenzie Balanced and IShares ESG

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

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

Diversification Opportunities for Mackenzie Balanced and IShares ESG

0.96

Correlation Coefficient

Mackenzie Balanced  IShares ESG

Almost no diversification

The 3 months correlation between Mackenzie and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mackenzie Balanced Allocation and iShares ESG Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Growth and Mackenzie Balanced 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 Mackenzie Balanced Allocation 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 Growth has no effect on the direction of Mackenzie Balanced i.e., Mackenzie Balanced and IShares ESG go up and down completely randomly.

Pair Corralation between Mackenzie Balanced and IShares ESG

Assuming the 90 days trading horizon Mackenzie Balanced is expected to generate 1.36 times less return on investment than IShares ESG. But when comparing it to its historical volatility, Mackenzie Balanced Allocation is 1.15 times less risky than IShares ESG. It trades about 0.14 of its potential returns per unit of risk. iShares ESG Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,682  in iShares ESG Growth on September 12, 2024 and sell it today you would earn a total of  1,212  from holding iShares ESG Growth or generate 25.89% return on investment over 90 days.

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

Mackenzie Balanced Allocation  vs.  iShares ESG Growth

Mackenzie Balanced

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mackenzie Balanced Allocation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Mackenzie Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares ESG Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Growth are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mackenzie Balanced and IShares ESG

The main advantage of trading using opposite Mackenzie Balanced and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mackenzie Balanced 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 Mackenzie Balanced Allocation and iShares ESG Growth 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.