Correlation Between IShares ESG and IShares Canadian
Can any of the company-specific risk be diversified away by investing in both IShares ESG and IShares Canadian 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 Canadian 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 iShares Canadian Universe, you can compare the effects of market volatilities on IShares ESG and IShares Canadian 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 Canadian. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares Canadian.
Diversification Opportunities for IShares ESG and IShares Canadian
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and iShares Canadian Universe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Canadian Universe 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 IShares Canadian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Canadian Universe has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Canadian go up and down completely randomly.
Pair Corralation between IShares ESG and IShares Canadian
Assuming the 90 days trading horizon IShares ESG is expected to generate 1.13 times less return on investment than IShares Canadian. But when comparing it to its historical volatility, iShares ESG Aware is 2.69 times less risky than IShares Canadian. It trades about 0.17 of its potential returns per unit of risk. iShares Canadian Universe is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,592 in iShares Canadian Universe on September 12, 2024 and sell it today you would earn a total of 281.00 from holding iShares Canadian Universe or generate 10.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG Aware vs. iShares Canadian Universe
Performance |
| Timeline |
| iShares ESG Aware |
| iShares Canadian Universe |
IShares ESG and IShares Canadian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and IShares Canadian
The main advantage of trading using opposite IShares ESG and IShares Canadian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, IShares Canadian 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 Canadian will offset losses from the drop in IShares Canadian's long position.| IShares ESG vs. iShares Canadian Universe | IShares ESG vs. iShares Canadian Real | IShares ESG vs. iShares Core Canadian | IShares ESG vs. iShares Core Canadian |
| IShares Canadian vs. iShares Canadian Short | IShares Canadian vs. iShares MSCI EAFE | IShares Canadian vs. iShares Core Canadian | IShares Canadian vs. iShares Canadian Real |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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