Correlation Between IShares ESG and IShares Core
Can any of the company-specific risk be diversified away by investing in both IShares ESG and IShares Core 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 Core into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG Balanced and iShares Core Balanced, you can compare the effects of market volatilities on IShares ESG and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares Core.
Diversification Opportunities for IShares ESG and IShares Core
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Balanced and iShares Core Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core Balanced 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 Balanced are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core Balanced has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Core go up and down completely randomly.
Pair Corralation between IShares ESG and IShares Core
Assuming the 90 days trading horizon iShares ESG Balanced is expected to generate 1.26 times more return on investment than IShares Core. However, IShares ESG is 1.26 times more volatile than iShares Core Balanced. It trades about 0.12 of its potential returns per unit of risk. iShares Core Balanced is currently generating about 0.13 per unit of risk. If you would invest 4,007 in iShares ESG Balanced on August 29, 2024 and sell it today you would earn a total of 1,175 from holding iShares ESG Balanced or generate 29.32% 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 Balanced vs. iShares Core Balanced
Performance |
| Timeline |
| iShares ESG Balanced |
| iShares Core Balanced |
IShares ESG and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and IShares Core
The main advantage of trading using opposite IShares ESG and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.| IShares ESG vs. iShares Core Growth | IShares ESG vs. Vanguard Balanced Portfolio | IShares ESG vs. iShares Core Conservative |
| IShares Core vs. iShares Core Growth | IShares Core vs. Vanguard Balanced Portfolio | IShares Core vs. iShares Core Conservative |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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