Correlation Between IShares ESG and SPDR SP

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Can any of the company-specific risk be diversified away by investing in both IShares ESG and SPDR SP 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 SPDR SP 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 SPDR SP World, you can compare the effects of market volatilities on IShares ESG and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and SPDR SP.

Diversification Opportunities for IShares ESG and SPDR SP

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IShares and SPDR is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and SPDR SP World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP World 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP World has no effect on the direction of IShares ESG i.e., IShares ESG and SPDR SP go up and down completely randomly.

Pair Corralation between IShares ESG and SPDR SP

Given the investment horizon of 90 days IShares ESG is expected to generate 1.01 times less return on investment than SPDR SP. In addition to that, IShares ESG is 1.01 times more volatile than SPDR SP World. It trades about 0.04 of its total potential returns per unit of risk. SPDR SP World is currently generating about 0.05 per unit of volatility. If you would invest  3,044  in SPDR SP World on November 5, 2024 and sell it today you would earn a total of  557.00  from holding SPDR SP World or generate 18.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

iShares ESG Aware  vs.  SPDR SP World

 Performance 
       Timeline  
iShares ESG Aware 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 rather sound technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
SPDR SP World 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP World are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, SPDR SP is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

IShares ESG and SPDR SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares ESG and SPDR SP

The main advantage of trading using opposite IShares ESG and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.
The idea behind iShares ESG Aware and SPDR SP World 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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