Correlation Between IShares MSCI and IShares ESG
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Emerging and iShares ESG Aware, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares ESG.
Diversification Opportunities for IShares MSCI and IShares ESG
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and IShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and iShares ESG Aware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Aware and IShares MSCI 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 MSCI Emerging 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 Aware has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares ESG go up and down completely randomly.
Pair Corralation between IShares MSCI and IShares ESG
Assuming the 90 days trading horizon iShares MSCI Emerging is expected to under-perform the IShares ESG. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Emerging is 1.04 times less risky than IShares ESG. The etf trades about -0.19 of its potential returns per unit of risk. The iShares ESG Aware is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 2,176 in iShares ESG Aware on August 26, 2024 and sell it today you would lose (63.00) from holding iShares ESG Aware or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Emerging vs. iShares ESG Aware
Performance |
| Timeline |
| iShares MSCI Emerging |
| iShares ESG Aware |
IShares MSCI and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and IShares ESG
The main advantage of trading using opposite IShares MSCI and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.| IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares MSCI Min | IShares MSCI vs. iShares Floating Rate | IShares MSCI vs. BMO Aggregate Bond |
| IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG MSCI | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
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 Positions Ratings module to 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.
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