Correlation Between ClearBridge Dividend and IShares ESG

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

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

Diversification Opportunities for ClearBridge Dividend and IShares ESG

0.4

Correlation Coefficient

ClearBridge Dividend  IShares ESG

Very weak diversification

The 3 months correlation between ClearBridge and IShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ClearBridge Dividend Strategy and iShares ESG USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG USD and ClearBridge Dividend 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 ClearBridge Dividend Strategy 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 USD has no effect on the direction of ClearBridge Dividend i.e., ClearBridge Dividend and IShares ESG go up and down completely randomly.

Pair Corralation between ClearBridge Dividend and IShares ESG

Given the investment horizon of 90 days ClearBridge Dividend is expected to generate 1.98 times less return on investment than IShares ESG. In addition to that, ClearBridge Dividend is 2.22 times more volatile than iShares ESG USD. It trades about 0.02 of its total potential returns per unit of risk. iShares ESG USD is currently generating about 0.1 per unit of volatility. If you would invest  2,258  in iShares ESG USD on December 30, 2024 and sell it today you would earn a total of  44.00  from holding iShares ESG USD or generate 1.95% return on investment over 90 days.

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

ClearBridge Dividend Strategy  vs.  iShares ESG USD

ClearBridge Dividend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ClearBridge Dividend Strategy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ClearBridge Dividend is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares ESG USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG USD are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ClearBridge Dividend and IShares ESG

The main advantage of trading using opposite ClearBridge Dividend and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearBridge Dividend 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 ClearBridge Dividend Strategy and iShares ESG USD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.