Correlation Between IShares ESG and Freedom 100
Can any of the company-specific risk be diversified away by investing in both IShares ESG and Freedom 100 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 Freedom 100 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 Freedom 100 Emerging, you can compare the effects of market volatilities on IShares ESG and Freedom 100 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 Freedom 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Freedom 100.
Diversification Opportunities for IShares ESG and Freedom 100
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Freedom is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Freedom 100 Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom 100 Emerging 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 Freedom 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom 100 Emerging has no effect on the direction of IShares ESG i.e., IShares ESG and Freedom 100 go up and down completely randomly.
Pair Corralation between IShares ESG and Freedom 100
Given the investment horizon of 90 days IShares ESG is expected to generate 2.7 times less return on investment than Freedom 100. But when comparing it to its historical volatility, iShares ESG Aware is 1.43 times less risky than Freedom 100. It trades about 0.11 of its potential returns per unit of risk. Freedom 100 Emerging is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 3,328 in Freedom 100 Emerging on October 26, 2024 and sell it today you would earn a total of 142.00 from holding Freedom 100 Emerging or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
iShares ESG Aware vs. Freedom 100 Emerging
Performance |
| Timeline |
| iShares ESG Aware |
| Freedom 100 Emerging |
IShares ESG and Freedom 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Freedom 100
The main advantage of trading using opposite IShares ESG and Freedom 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Freedom 100 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 Freedom 100 will offset losses from the drop in Freedom 100's long position.| IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG USD |
| Freedom 100 vs. Horizon Kinetics Inflation | Freedom 100 vs. iShares MSCI Emerging | Freedom 100 vs. iShares Emerging Markets | Freedom 100 vs. WisdomTree International High |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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