Correlation Between IShares ESG and Purpose Multi

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

By analyzing existing cross correlation between iShares ESG Conservative and Purpose Multi Asset Income, you can compare the effects of market volatilities on IShares ESG and Purpose Multi 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 Purpose Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Purpose Multi.

Diversification Opportunities for IShares ESG and Purpose Multi

0.3

Correlation Coefficient

IShares ESG  Purpose Multi

Weak diversification

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

Pair Corralation between IShares ESG and Purpose Multi

Assuming the 90 days trading horizon iShares ESG Conservative is expected to generate 1.01 times more return on investment than Purpose Multi. However, IShares ESG is 1.01 times more volatile than Purpose Multi Asset Income. It trades about 0.13 of its potential returns per unit of risk. Purpose Multi Asset Income is currently generating about -0.16 per unit of risk. If you would invest  4,167  in iShares ESG Conservative on March 29, 2024 and sell it today you would earn a total of  58.00  from holding iShares ESG Conservative or generate 1.39% return on investment over 90 days.

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

iShares ESG Conservative  vs.  Purpose Multi Asset Income

iShares ESG Conservative

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Conservative are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Purpose Multi Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purpose Multi Asset Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Purpose Multi is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares ESG and Purpose Multi

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

The idea behind iShares ESG Conservative and Purpose Multi Asset Income 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.