Correlation Between Nuveen ESG and IShares ESG

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

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

Diversification Opportunities for Nuveen ESG and IShares ESG

0.23

Correlation Coefficient

Nuveen ESG  IShares ESG

Modest diversification

The 3 months correlation between Nuveen and IShares is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen ESG Small Cap 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 Nuveen 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 Nuveen ESG Small Cap 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 Nuveen ESG i.e., Nuveen ESG and IShares ESG go up and down completely randomly.

Pair Corralation between Nuveen ESG and IShares ESG

Given the investment horizon of 90 days Nuveen ESG is expected to generate 1.06 times less return on investment than IShares ESG. In addition to that, Nuveen ESG is 1.39 times more volatile than iShares ESG Aware. It trades about 0.03 of its total potential returns per unit of risk. iShares ESG Aware is currently generating about 0.05 per unit of volatility. If you would invest  6,661  in iShares ESG Aware on October 26, 2024 and sell it today you would earn a total of  1,296  from holding iShares ESG Aware or generate 19.46% return on investment over 90 days.

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

Nuveen ESG Small Cap  vs.  iShares ESG Aware

Nuveen ESG Small

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen ESG Small Cap are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nuveen ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares ESG Aware

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuveen ESG and IShares ESG

The main advantage of trading using opposite Nuveen ESG and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen ESG 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 Nuveen ESG Small Cap 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.