Correlation Between IShares ESG and IShares Canadian

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

By analyzing existing cross correlation between iShares ESG Aware and iShares Canadian Real, you can compare the effects of market volatilities on IShares ESG and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares Canadian.

Diversification Opportunities for IShares ESG and IShares Canadian

0.94

Correlation Coefficient

IShares ESG  IShares Canadian

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and iShares Canadian Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Real 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 Aware are associated (or correlated) with IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Real has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Canadian go up and down completely randomly.

Pair Corralation between IShares ESG and IShares Canadian

Assuming the 90 days trading horizon iShares ESG Aware is expected to generate 0.57 times more return on investment than IShares Canadian. However, iShares ESG Aware is 1.75 times less risky than IShares Canadian. It trades about 0.0 of its potential returns per unit of risk. iShares Canadian Real is currently generating about 0.0 per unit of risk. If you would invest  1,833  in iShares ESG Aware on September 17, 2024 and sell it today you would earn a total of  1.00  from holding iShares ESG Aware or generate 0.05% return on investment over 90 days.

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

iShares ESG Aware  vs.  iShares Canadian Real

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 very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Canadian Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Canadian Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and IShares Canadian

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

The idea behind iShares ESG Aware and iShares Canadian Real 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.