Correlation Between IShares ESG and Vert Global

Can any of the company-specific risk be diversified away by investing in both IShares ESG and Vert Global 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 Vert Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares ESG MSCI and Vert Global Sustainable, you can compare the effects of market volatilities on IShares ESG and Vert Global 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 Vert Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Vert Global.

Diversification Opportunities for IShares ESG and Vert Global

0.3

Correlation Coefficient

IShares ESG  Vert Global

Weak diversification

The 3 months correlation between IShares and Vert is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG MSCI and Vert Global Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vert Global Sustainable 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 MSCI are associated (or correlated) with Vert Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vert Global Sustainable has no effect on the direction of IShares ESG i.e., IShares ESG and Vert Global go up and down completely randomly.

Pair Corralation between IShares ESG and Vert Global

Given the investment horizon of 90 days iShares ESG MSCI is expected to generate 0.68 times more return on investment than Vert Global. However, iShares ESG MSCI is 1.47 times less risky than Vert Global. It trades about -0.03 of its potential returns per unit of risk. Vert Global Sustainable is currently generating about -0.15 per unit of risk. If you would invest  2,841  in iShares ESG MSCI on September 25, 2024 and sell it today you would lose (36.00) from holding iShares ESG MSCI or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares ESG MSCI  vs.  Vert Global Sustainable

iShares ESG MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares ESG MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, IShares ESG is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vert Global Sustainable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vert Global Sustainable has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares ESG and Vert Global

The main advantage of trading using opposite IShares ESG and Vert Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, Vert Global 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 Vert Global will offset losses from the drop in Vert Global's long position.

The idea behind iShares ESG MSCI and Vert Global Sustainable 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.