Correlation Between IShares ESG and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both IShares ESG and Vanguard Industrials 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 Vanguard Industrials 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 Vanguard Industrials Index, you can compare the effects of market volatilities on IShares ESG and Vanguard Industrials 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 Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Vanguard Industrials.
Diversification Opportunities for IShares ESG and Vanguard Industrials
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials 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 Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of IShares ESG i.e., IShares ESG and Vanguard Industrials go up and down completely randomly.
Pair Corralation between IShares ESG and Vanguard Industrials
Given the investment horizon of 90 days IShares ESG is expected to generate 2.31 times less return on investment than Vanguard Industrials. But when comparing it to its historical volatility, iShares ESG Aware is 1.54 times less risky than Vanguard Industrials. It trades about 0.11 of its potential returns per unit of risk. Vanguard Industrials Index is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 26,186 in Vanguard Industrials Index on August 24, 2024 and sell it today you would earn a total of 1,146 from holding Vanguard Industrials Index or generate 4.38% 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. Vanguard Industrials Index
Performance |
| Timeline |
| iShares ESG Aware |
| Vanguard Industrials |
IShares ESG and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and Vanguard Industrials
The main advantage of trading using opposite IShares ESG and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Vanguard Industrials 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 Vanguard Industrials will offset losses from the drop in Vanguard Industrials' long position.| IShares ESG vs. Electric Car | IShares ESG vs. JNS Holdings Corp | IShares ESG vs. Plyzer Technologies | IShares ESG vs. Visium Technologies |
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.
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