Correlation Between IShares MSCI and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both IShares 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 IShares 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 iShares MSCI EAFE and FlexShares ESG Climate, you can compare the effects of market volatilities on IShares 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 IShares MSCI with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and FlexShares ESG.
Diversification Opportunities for IShares MSCI and FlexShares ESG
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE 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 IShares 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 iShares MSCI EAFE 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 IShares MSCI i.e., IShares MSCI and FlexShares ESG go up and down completely randomly.
Pair Corralation between IShares MSCI and FlexShares ESG
Considering the 90-day investment horizon iShares MSCI EAFE is expected to generate 1.02 times more return on investment than FlexShares ESG. However, IShares MSCI is 1.02 times more volatile than FlexShares ESG Climate. It trades about 0.05 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.05 per unit of risk. If you would invest 6,352 in iShares MSCI EAFE on August 30, 2024 and sell it today you would earn a total of 1,441 from holding iShares MSCI EAFE or generate 22.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. FlexShares ESG Climate
Performance |
| Timeline |
| iShares MSCI EAFE |
| FlexShares ESG Climate |
IShares MSCI and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and FlexShares ESG
The main advantage of trading using opposite IShares MSCI and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 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.| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares Core Aggregate | IShares MSCI vs. iShares Russell 2000 | IShares MSCI vs. iShares MSCI Japan |
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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