Correlation Between SPDR MSCI and FlexShares Developed
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 SPDR MSCI and FlexShares Developed 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 Developed Markets, you can compare the effects of market volatilities on SPDR MSCI 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 SPDR MSCI with a short position of FlexShares Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and FlexShares Developed.
Diversification Opportunities for SPDR MSCI and FlexShares Developed
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPDR and FlexShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and FlexShares Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Developed 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 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 SPDR MSCI i.e., SPDR MSCI and FlexShares Developed go up and down completely randomly.
Pair Corralation between SPDR MSCI and FlexShares Developed
Given the investment horizon of 90 days SPDR MSCI Emerging is expected to under-perform the FlexShares Developed. In addition to that, SPDR MSCI is 1.55 times more volatile than FlexShares Developed Markets. It trades about -0.13 of its total potential returns per unit of risk. FlexShares Developed Markets is currently generating about -0.02 per unit of volatility. If you would invest 2,769 in FlexShares Developed Markets on September 2, 2024 and sell it today you would lose (9.00) from holding FlexShares Developed Markets or give up 0.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI Emerging vs. FlexShares Developed Markets
Performance |
| Timeline |
| SPDR MSCI Emerging |
| FlexShares Developed |
SPDR MSCI and FlexShares Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and FlexShares Developed
The main advantage of trading using opposite SPDR MSCI and FlexShares Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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.| 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 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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