Correlation Between NYSE Composite and IShares ESG
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and IShares ESG 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 NYSE Composite and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and iShares ESG Screened, you can compare the effects of market volatilities on NYSE Composite and IShares ESG 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 NYSE Composite with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and IShares ESG.
Diversification Opportunities for NYSE Composite and IShares ESG
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and iShares ESG Screened in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Screened and NYSE Composite 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 NYSE Composite are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Screened has no effect on the direction of NYSE Composite i.e., NYSE Composite and IShares ESG go up and down completely randomly.
Pair Corralation between NYSE Composite and IShares ESG
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.49 times less return on investment than IShares ESG. But when comparing it to its historical volatility, NYSE Composite is 1.34 times less risky than IShares ESG. It trades about 0.14 of its potential returns per unit of risk. iShares ESG Screened is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,280 in iShares ESG Screened on August 29, 2024 and sell it today you would earn a total of 359.00 from holding iShares ESG Screened or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. iShares ESG Screened
Performance |
| Timeline |
NYSE Composite and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
iShares ESG Screened
Pair trading matchups for IShares ESG
Pair Trading with NYSE Composite and IShares ESG
The main advantage of trading using opposite NYSE Composite and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, IShares ESG 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 ESG will offset losses from the drop in IShares ESG's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| IShares ESG vs. Morningstar Unconstrained Allocation | IShares ESG vs. High Yield Municipal Fund | IShares ESG vs. Via Renewables | IShares ESG 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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