Correlation Between IShares ESG and Vanguard FTSE

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

Diversification Opportunities for IShares ESG and Vanguard FTSE

0.92

Correlation Coefficient

IShares ESG  Vanguard FTSE

Almost no diversification

The 3 months correlation between IShares and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of IShares ESG i.e., IShares ESG and Vanguard FTSE go up and down completely randomly.

Pair Corralation between IShares ESG and Vanguard FTSE

Given the investment horizon of 90 days iShares ESG Aware is expected to generate 1.11 times more return on investment than Vanguard FTSE. However, IShares ESG is 1.11 times more volatile than Vanguard FTSE All World. It trades about 0.05 of its potential returns per unit of risk. Vanguard FTSE All World is currently generating about 0.04 per unit of risk. If you would invest  8,631  in iShares ESG Aware on February 5, 2024 and sell it today you would earn a total of  2,609  from holding iShares ESG Aware or generate 30.23% return on investment over 90 days.

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

iShares ESG Aware  vs.  Vanguard FTSE All World

iShares ESG Aware

Risk-Adjusted Performance

6 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard FTSE All

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE All World are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with IShares ESG and Vanguard FTSE

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

The idea behind iShares ESG Aware and Vanguard FTSE All World 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.