Correlation Between ClearShares Ultra and IShares ESG

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

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

Diversification Opportunities for ClearShares Ultra and IShares ESG

0.89

Correlation Coefficient

ClearShares Ultra  IShares ESG

Very poor diversification

The 3 months correlation between ClearShares and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ClearShares Ultra Short Maturi and iShares ESG Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aggregate and ClearShares Ultra 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 ClearShares Ultra Short Maturity 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 Aggregate has no effect on the direction of ClearShares Ultra i.e., ClearShares Ultra and IShares ESG go up and down completely randomly.

Pair Corralation between ClearShares Ultra and IShares ESG

Given the investment horizon of 90 days ClearShares Ultra is expected to generate 2.29 times less return on investment than IShares ESG. But when comparing it to its historical volatility, ClearShares Ultra Short Maturity is 17.61 times less risky than IShares ESG. It trades about 1.01 of its potential returns per unit of risk. iShares ESG Aggregate is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,621  in iShares ESG Aggregate on December 30, 2024 and sell it today you would earn a total of  115.00  from holding iShares ESG Aggregate or generate 2.49% return on investment over 90 days.

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

ClearShares Ultra Short Maturi  vs.  iShares ESG Aggregate

ClearShares Ultra Short

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in ClearShares Ultra Short Maturity are ranked lower than 79 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ClearShares Ultra is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

iShares ESG Aggregate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aggregate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ClearShares Ultra and IShares ESG

The main advantage of trading using opposite ClearShares Ultra and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearShares Ultra 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 ClearShares Ultra Short Maturity and iShares ESG Aggregate 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.