Correlation Between IShares ESG and IShares IBoxx
Can any of the company-specific risk be diversified away by investing in both IShares ESG and IShares IBoxx 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 IBoxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG USD and iShares iBoxx High, you can compare the effects of market volatilities on IShares ESG and IShares IBoxx 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 IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares IBoxx.
Diversification Opportunities for IShares ESG and IShares IBoxx
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and IShares is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG USD and iShares iBoxx High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx High 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 USD are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx High has no effect on the direction of IShares ESG i.e., IShares ESG and IShares IBoxx go up and down completely randomly.
Pair Corralation between IShares ESG and IShares IBoxx
Given the investment horizon of 90 days IShares ESG is expected to generate 1.59 times less return on investment than IShares IBoxx. In addition to that, IShares ESG is 1.32 times more volatile than iShares iBoxx High. It trades about 0.07 of its total potential returns per unit of risk. iShares iBoxx High is currently generating about 0.16 per unit of volatility. If you would invest 7,137 in iShares iBoxx High on September 4, 2024 and sell it today you would earn a total of 828.00 from holding iShares iBoxx High or generate 11.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG USD vs. iShares iBoxx High
Performance |
| Timeline |
| iShares ESG USD |
| iShares iBoxx High |
IShares ESG and IShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and IShares IBoxx
The main advantage of trading using opposite IShares ESG and IShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, IShares IBoxx 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 IBoxx will offset losses from the drop in IShares IBoxx's long position.| IShares ESG vs. iShares iBoxx High | IShares ESG vs. iShares 1 3 Year | IShares ESG vs. iShares TIPS Bond | IShares ESG vs. iShares 7 10 Year |
| IShares IBoxx vs. iShares iBoxx Investment | IShares IBoxx vs. SPDR Bloomberg High | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx vs. iShares 20 Year |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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