Correlation Between IShares ESG and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both IShares ESG and IShares MSCI 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 IShares MSCI 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 iShares MSCI USA, you can compare the effects of market volatilities on IShares ESG and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares MSCI.
Diversification Opportunities for IShares ESG and IShares MSCI
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of IShares ESG i.e., IShares ESG and IShares MSCI go up and down completely randomly.
Pair Corralation between IShares ESG and IShares MSCI
Given the investment horizon of 90 days IShares ESG is expected to generate 1.15 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, iShares ESG Aware is 1.04 times less risky than IShares MSCI. It trades about 0.4 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 9,467 in iShares MSCI USA on September 1, 2024 and sell it today you would earn a total of 714.00 from holding iShares MSCI USA or generate 7.54% 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 Aware vs. iShares MSCI USA
Performance |
| Timeline |
| iShares ESG Aware |
| iShares MSCI USA |
IShares ESG and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and IShares MSCI
The main advantage of trading using opposite IShares ESG and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, IShares MSCI 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 MSCI will offset losses from the drop in IShares MSCI's long position.| IShares ESG vs. Vanguard Total Stock | IShares ESG vs. SPDR SP 500 | IShares ESG vs. iShares Core SP | IShares ESG vs. Vanguard Dividend Appreciation |
| IShares MSCI vs. iShares Russell Top | IShares MSCI vs. iShares Russell Top | IShares MSCI vs. iShares MSCI USA | IShares MSCI vs. iShares MSCI Ireland |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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