Correlation Between IShares ESG and IShares IBonds

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

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

Diversification Opportunities for IShares ESG and IShares IBonds

0.21

Correlation Coefficient

IShares ESG  IShares IBonds

Modest diversification

The 3 months correlation between IShares and IShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Advanced and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec and IShares 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 iShares ESG Advanced are associated (or correlated) with IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of IShares ESG i.e., IShares ESG and IShares IBonds go up and down completely randomly.

Pair Corralation between IShares ESG and IShares IBonds

Given the investment horizon of 90 days iShares ESG Advanced is expected to generate 7.15 times more return on investment than IShares IBonds. However, IShares ESG is 7.15 times more volatile than iShares iBonds Dec. It trades about 0.1 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.11 per unit of risk. If you would invest  3,110  in iShares ESG Advanced on October 11, 2024 and sell it today you would earn a total of  1,925  from holding iShares ESG Advanced or generate 61.9% return on investment over 90 days.

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

iShares ESG Advanced  vs.  iShares iBonds Dec

iShares ESG Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG Advanced has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares iBonds Dec

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBonds is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares ESG and IShares IBonds

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

The idea behind iShares ESG Advanced and iShares iBonds Dec 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..