Correlation Between IShares ESG and HCM Defender
Can any of the company-specific risk be diversified away by investing in both IShares ESG and HCM Defender 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 HCM Defender 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 HCM Defender 500, you can compare the effects of market volatilities on IShares ESG and HCM Defender 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 HCM Defender. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and HCM Defender.
Diversification Opportunities for IShares ESG and HCM Defender
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and HCM is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and HCM Defender 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCM Defender 500 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 HCM Defender. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCM Defender 500 has no effect on the direction of IShares ESG i.e., IShares ESG and HCM Defender go up and down completely randomly.
Pair Corralation between IShares ESG and HCM Defender
Given the investment horizon of 90 days IShares ESG is expected to generate 1.15 times less return on investment than HCM Defender. But when comparing it to its historical volatility, iShares ESG Aware is 1.36 times less risky than HCM Defender. It trades about 0.17 of its potential returns per unit of risk. HCM Defender 500 is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,135 in HCM Defender 500 on August 26, 2024 and sell it today you would earn a total of 191.00 from holding HCM Defender 500 or generate 3.72% 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. HCM Defender 500
Performance |
| Timeline |
| iShares ESG Aware |
| HCM Defender 500 |
IShares ESG and HCM Defender Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and HCM Defender
The main advantage of trading using opposite IShares ESG and HCM Defender positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, HCM Defender 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 HCM Defender will offset losses from the drop in HCM Defender's long position.| IShares ESG vs. Morningstar Unconstrained Allocation | IShares ESG vs. High Yield Municipal Fund | IShares ESG vs. Via Renewables | IShares ESG vs. Knife River |
| HCM Defender vs. Morningstar Unconstrained Allocation | HCM Defender vs. High Yield Municipal Fund | HCM Defender vs. Via Renewables | HCM Defender vs. Knife River |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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