Correlation Between IShares NASDAQ and IShares ESG

Can any of the company-specific risk be diversified away by investing in both IShares NASDAQ 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 NASDAQ 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 NASDAQ 100 and iShares ESG Advanced, you can compare the effects of market volatilities on IShares NASDAQ 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 NASDAQ with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares NASDAQ and IShares ESG.

Diversification Opportunities for IShares NASDAQ and IShares ESG

0.94

Correlation Coefficient

IShares NASDAQ  IShares ESG

Almost no diversification

The 3 months correlation between IShares and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares NASDAQ 100 and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced and IShares NASDAQ 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 NASDAQ 100 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 Advanced has no effect on the direction of IShares NASDAQ i.e., IShares NASDAQ and IShares ESG go up and down completely randomly.

Pair Corralation between IShares NASDAQ and IShares ESG

Assuming the 90 days trading horizon iShares NASDAQ 100 is expected to generate 1.72 times more return on investment than IShares ESG. However, IShares NASDAQ is 1.72 times more volatile than iShares ESG Advanced. It trades about 0.19 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.27 per unit of risk. If you would invest  4,891  in iShares NASDAQ 100 on September 15, 2024 and sell it today you would earn a total of  586.00  from holding iShares NASDAQ 100 or generate 11.98% return on investment over 90 days.

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

iShares NASDAQ 100  vs.  iShares ESG Advanced

iShares NASDAQ 100

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NASDAQ 100 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares ESG Advanced

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, IShares ESG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares NASDAQ and IShares ESG

The main advantage of trading using opposite IShares NASDAQ and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares NASDAQ 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 NASDAQ 100 and iShares ESG Advanced 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.