Correlation Between IShares ESG and Barings Global

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

Diversification Opportunities for IShares ESG and Barings Global

0.89

Correlation Coefficient

IShares ESG  Barings Global

Very poor diversification

The 3 months correlation between IShares and Barings is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Barings Global Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Global Short 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 Barings Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Global Short has no effect on the direction of IShares ESG i.e., IShares ESG and Barings Global go up and down completely randomly.

Pair Corralation between IShares ESG and Barings Global

Given the investment horizon of 90 days iShares ESG Aware is expected to under-perform the Barings Global. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Aware is 1.09 times less risky than Barings Global. The etf trades about -0.14 of its potential returns per unit of risk. The Barings Global Short is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,423  in Barings Global Short on February 6, 2024 and sell it today you would lose (10.00) from holding Barings Global Short or give up 0.7% of portfolio value over 90 days.

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

iShares ESG Aware  vs.  Barings Global Short

iShares ESG Aware

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Barings Global Short

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Global Short are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Barings Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares ESG and Barings Global

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

The idea behind iShares ESG Aware and Barings Global Short 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.