Correlation Between IShares ESG and Schwab Aggregate
Can any of the company-specific risk be diversified away by investing in both IShares ESG and Schwab Aggregate 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 Schwab Aggregate 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 Schwab Aggregate Bond, you can compare the effects of market volatilities on IShares ESG and Schwab Aggregate 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 Schwab Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Schwab Aggregate.
Diversification Opportunities for IShares ESG and Schwab Aggregate
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Schwab is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aggregate and Schwab Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Aggregate Bond 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 Schwab Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Aggregate Bond has no effect on the direction of IShares ESG i.e., IShares ESG and Schwab Aggregate go up and down completely randomly.
Pair Corralation between IShares ESG and Schwab Aggregate
Given the investment horizon of 90 days IShares ESG is expected to generate 1.01 times less return on investment than Schwab Aggregate. In addition to that, IShares ESG is 1.07 times more volatile than Schwab Aggregate Bond. It trades about 0.26 of its total potential returns per unit of risk. Schwab Aggregate Bond is currently generating about 0.28 per unit of volatility. If you would invest 2,252 in Schwab Aggregate Bond on November 9, 2024 and sell it today you would earn a total of 38.00 from holding Schwab Aggregate Bond or generate 1.69% 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 Aggregate vs. Schwab Aggregate Bond
Performance |
| Timeline |
| iShares ESG Aggregate |
| Schwab Aggregate Bond |
IShares ESG and Schwab Aggregate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Schwab Aggregate
The main advantage of trading using opposite IShares ESG and Schwab Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Schwab Aggregate 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 Schwab Aggregate will offset losses from the drop in Schwab Aggregate'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 |
| Schwab Aggregate vs. Schwab International Equity | Schwab Aggregate vs. Schwab Emerging Markets | Schwab Aggregate vs. Schwab Short Term Treasury | Schwab Aggregate vs. Schwab TIPS ETF |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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