Correlation Between SPDR MSCI and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and FlexShares 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 SPDR MSCI and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI Emerging and FlexShares ESG Climate, you can compare the effects of market volatilities on SPDR MSCI and FlexShares 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 SPDR MSCI with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and FlexShares ESG.
Diversification Opportunities for SPDR MSCI and FlexShares ESG
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SPDR and FlexShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate and SPDR MSCI 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 SPDR MSCI Emerging are associated (or correlated) with FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and FlexShares ESG go up and down completely randomly.
Pair Corralation between SPDR MSCI and FlexShares ESG
Given the investment horizon of 90 days SPDR MSCI Emerging is expected to under-perform the FlexShares ESG. In addition to that, SPDR MSCI is 1.24 times more volatile than FlexShares ESG Climate. It trades about -0.11 of its total potential returns per unit of risk. FlexShares ESG Climate is currently generating about -0.04 per unit of volatility. If you would invest 5,039 in FlexShares ESG Climate on September 1, 2024 and sell it today you would lose (37.00) from holding FlexShares ESG Climate or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI Emerging vs. FlexShares ESG Climate
Performance |
| Timeline |
| SPDR MSCI Emerging |
| FlexShares ESG Climate |
SPDR MSCI and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and FlexShares ESG
The main advantage of trading using opposite SPDR MSCI and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, FlexShares 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 FlexShares ESG will offset losses from the drop in FlexShares ESG's long position.| SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR DoubleLine Emerging | SPDR MSCI vs. SPDR MSCI EAFE |
| FlexShares ESG vs. iShares ESG Aggregate | FlexShares ESG vs. SPDR MSCI Emerging | FlexShares ESG vs. Aquagold International | FlexShares ESG 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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