Correlation Between IShares 5 and IShares ESG

Can any of the company-specific risk be diversified away by investing in both IShares 5 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 5 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 5 10 Year and iShares ESG USD, you can compare the effects of market volatilities on IShares 5 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 5 with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 5 and IShares ESG.

Diversification Opportunities for IShares 5 and IShares ESG

1.0

Correlation Coefficient

IShares 5  IShares ESG

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 5 10 Year and iShares ESG USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG USD and IShares 5 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 5 10 Year 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 USD has no effect on the direction of IShares 5 i.e., IShares 5 and IShares ESG go up and down completely randomly.

Pair Corralation between IShares 5 and IShares ESG

Given the investment horizon of 90 days IShares 5 is expected to generate 1.51 times less return on investment than IShares ESG. But when comparing it to its historical volatility, iShares 5 10 Year is 1.15 times less risky than IShares ESG. It trades about 0.01 of its potential returns per unit of risk. iShares ESG USD is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,330  in iShares ESG USD on September 2, 2024 and sell it today you would earn a total of  7.00  from holding iShares ESG USD or generate 0.3% return on investment over 90 days.

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

iShares 5 10 Year  vs.  iShares ESG USD

iShares 5 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 5 10 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, IShares 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares ESG USD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG USD are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares ESG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares 5 and IShares ESG

The main advantage of trading using opposite IShares 5 and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 5 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.

The idea behind iShares 5 10 Year and iShares ESG USD 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..