Correlation Between IShares ESG and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both IShares ESG and Overlay Shares 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 Overlay Shares 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 Overlay Shares Hedged, you can compare the effects of market volatilities on IShares ESG and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Overlay Shares.
Diversification Opportunities for IShares ESG and Overlay Shares
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Overlay is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Overlay Shares Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Hedged 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 Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Hedged has no effect on the direction of IShares ESG i.e., IShares ESG and Overlay Shares go up and down completely randomly.
Pair Corralation between IShares ESG and Overlay Shares
Given the investment horizon of 90 days iShares ESG Aware is expected to generate 1.53 times more return on investment than Overlay Shares. However, IShares ESG is 1.53 times more volatile than Overlay Shares Hedged. It trades about 0.17 of its potential returns per unit of risk. Overlay Shares Hedged is currently generating about 0.14 per unit of risk. If you would invest 12,761 in iShares ESG Aware on August 30, 2024 and sell it today you would earn a total of 423.00 from holding iShares ESG Aware or generate 3.31% 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. Overlay Shares Hedged
Performance |
| Timeline |
| iShares ESG Aware |
| Overlay Shares Hedged |
IShares ESG and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Overlay Shares
The main advantage of trading using opposite IShares ESG and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| IShares ESG vs. JPMorgan BetaBuilders International | IShares ESG vs. JPMorgan Core Plus | IShares ESG vs. JPMorgan BetaBuilders Canada | IShares ESG vs. JPMorgan Emerging Markets |
| Overlay Shares vs. Listed Funds Trust | Overlay Shares vs. Overlay Shares Core | Overlay Shares vs. Overlay Shares Large | Overlay Shares vs. Overlay Shares Municipal |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |