Correlation Between IShares ESG and RPAR Risk
Can any of the company-specific risk be diversified away by investing in both IShares ESG and RPAR Risk 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 RPAR Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG Aggregate and RPAR Risk Parity, you can compare the effects of market volatilities on IShares ESG and RPAR Risk 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 RPAR Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and RPAR Risk.
Diversification Opportunities for IShares ESG and RPAR Risk
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and RPAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aggregate and RPAR Risk Parity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RPAR Risk Parity 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 Aggregate are associated (or correlated) with RPAR Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RPAR Risk Parity has no effect on the direction of IShares ESG i.e., IShares ESG and RPAR Risk go up and down completely randomly.
Pair Corralation between IShares ESG and RPAR Risk
Given the investment horizon of 90 days iShares ESG Aggregate is expected to under-perform the RPAR Risk. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Aggregate is 2.04 times less risky than RPAR Risk. The etf trades about -0.07 of its potential returns per unit of risk. The RPAR Risk Parity is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,009 in RPAR Risk Parity on September 12, 2024 and sell it today you would lose (24.00) from holding RPAR Risk Parity or give up 1.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.44% |
| Values | Daily Returns |
iShares ESG Aggregate vs. RPAR Risk Parity
Performance |
| Timeline |
| iShares ESG Aggregate |
| RPAR Risk Parity |
IShares ESG and RPAR Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and RPAR Risk
The main advantage of trading using opposite IShares ESG and RPAR Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, RPAR Risk 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 RPAR Risk will offset losses from the drop in RPAR Risk's long position.| IShares ESG vs. iShares ESG 1 5 | IShares ESG vs. iShares ESG USD | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
| RPAR Risk vs. Amplify BlackSwan Growth | RPAR Risk vs. WisdomTree 9060 Balanced | RPAR Risk vs. iShares Core Growth | RPAR Risk vs. PIMCO 15 Year |
Check out your portfolio center.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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