Correlation Between IShares ESG and IShares Nasdaq

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

By analyzing existing cross correlation between iShares ESG Advanced and iShares Nasdaq 100 ex, you can compare the effects of market volatilities on IShares ESG and IShares Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and IShares Nasdaq.

Diversification Opportunities for IShares ESG and IShares Nasdaq

0.04

Correlation Coefficient

IShares ESG  IShares Nasdaq

Significant diversification

The 3 months correlation between IShares and IShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Advanced and iShares Nasdaq 100 ex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Nasdaq 100 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 Advanced are associated (or correlated) with IShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Nasdaq 100 has no effect on the direction of IShares ESG i.e., IShares ESG and IShares Nasdaq go up and down completely randomly.

Pair Corralation between IShares ESG and IShares Nasdaq

Given the investment horizon of 90 days iShares ESG Advanced is expected to under-perform the IShares Nasdaq. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Advanced is 1.29 times less risky than IShares Nasdaq. The etf trades about -0.08 of its potential returns per unit of risk. The iShares Nasdaq 100 ex is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,567  in iShares Nasdaq 100 ex on September 14, 2024 and sell it today you would earn a total of  6.00  from holding iShares Nasdaq 100 ex or generate 0.23% return on investment over 90 days.

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

iShares ESG Advanced  vs.  iShares Nasdaq 100 ex

iShares ESG Advanced

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Nasdaq 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Nasdaq 100 ex are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, IShares Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares ESG and IShares Nasdaq

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

The idea behind iShares ESG Advanced and iShares Nasdaq 100 ex 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.