Correlation Between IShares ESG and Principal

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Can any of the company-specific risk be diversified away by investing in both IShares ESG and Principal 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 Principal 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 Principal, you can compare the effects of market volatilities on IShares ESG and Principal 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 Principal. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Principal.

Diversification Opportunities for IShares ESG and Principal

ISharesPrincipalDiversified AwayISharesPrincipalDiversified Away100%
0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between IShares and Principal is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Principal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal 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 Principal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal has no effect on the direction of IShares ESG i.e., IShares ESG and Principal go up and down completely randomly.

Pair Corralation between IShares ESG and Principal

If you would invest  2,678  in Principal on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Principal or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy4.76%
ValuesDaily Returns

iShares ESG Aware  vs.  Principal

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20246810
JavaScript chart by amCharts 3.21.15ESGU PLRG
       Timeline  
iShares ESG Aware 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, IShares ESG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec124126128130132
Principal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Principal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Principal is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

IShares ESG and Principal Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.4-1.8-1.2-0.590.010.621.241.872.5 0.10.20.30.40.50.60.7
JavaScript chart by amCharts 3.21.15ESGU PLRG
       Returns  

Pair Trading with IShares ESG and Principal

The main advantage of trading using opposite IShares ESG and Principal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Principal 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 Principal will offset losses from the drop in Principal's long position.
The idea behind iShares ESG Aware and Principal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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