Correlation Between IShares ESG and FlexShares Developed
Can any of the company-specific risk be diversified away by investing in both IShares ESG and FlexShares Developed 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 FlexShares Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares ESG Aggregate and FlexShares Developed Markets, you can compare the effects of market volatilities on IShares ESG and FlexShares Developed 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 FlexShares Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and FlexShares Developed.
Diversification Opportunities for IShares ESG and FlexShares Developed
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and FlexShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aggregate and FlexShares Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Developed 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 Aggregate are associated (or correlated) with FlexShares Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Developed has no effect on the direction of IShares ESG i.e., IShares ESG and FlexShares Developed go up and down completely randomly.
Pair Corralation between IShares ESG and FlexShares Developed
Given the investment horizon of 90 days iShares ESG Aggregate is expected to generate 0.57 times more return on investment than FlexShares Developed. However, iShares ESG Aggregate is 1.77 times less risky than FlexShares Developed. It trades about 0.19 of its potential returns per unit of risk. FlexShares Developed Markets is currently generating about -0.02 per unit of risk. If you would invest 4,685 in iShares ESG Aggregate on September 2, 2024 and sell it today you would earn a total of 71.00 from holding iShares ESG Aggregate or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares ESG Aggregate vs. FlexShares Developed Markets
Performance |
| Timeline |
| iShares ESG Aggregate |
| FlexShares Developed |
IShares ESG and FlexShares Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares ESG and FlexShares Developed
The main advantage of trading using opposite IShares ESG and FlexShares Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG position performs unexpectedly, FlexShares Developed 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 FlexShares Developed will offset losses from the drop in FlexShares Developed's long position.| IShares ESG vs. iShares ESG 1 5 | IShares ESG vs. iShares ESG USD | IShares ESG vs. iShares ESG Aware | IShares ESG vs. iShares ESG Aware |
| FlexShares Developed vs. iShares ESG Aggregate | FlexShares Developed vs. SPDR MSCI Emerging | FlexShares Developed vs. Aquagold International | FlexShares Developed vs. Thrivent High Yield |
Check out your portfolio center.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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