Correlation Between FlexShares STOXX and FlexShares Real
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and FlexShares Real 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 FlexShares STOXX and FlexShares Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares STOXX Global and FlexShares Real Assets, you can compare the effects of market volatilities on FlexShares STOXX and FlexShares Real 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 FlexShares STOXX with a short position of FlexShares Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and FlexShares Real.
Diversification Opportunities for FlexShares STOXX and FlexShares Real
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and FlexShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and FlexShares Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Real Assets and FlexShares STOXX 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 FlexShares STOXX Global are associated (or correlated) with FlexShares Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Real Assets has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and FlexShares Real go up and down completely randomly.
Pair Corralation between FlexShares STOXX and FlexShares Real
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 1.0 times more return on investment than FlexShares Real. However, FlexShares STOXX is 1.0 times more volatile than FlexShares Real Assets. It trades about 0.1 of its potential returns per unit of risk. FlexShares Real Assets is currently generating about 0.03 per unit of risk. If you would invest 12,062 in FlexShares STOXX Global on August 29, 2024 and sell it today you would earn a total of 5,154 from holding FlexShares STOXX Global or generate 42.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares STOXX Global vs. FlexShares Real Assets
Performance |
| Timeline |
| FlexShares STOXX Global |
| FlexShares Real Assets |
FlexShares STOXX and FlexShares Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and FlexShares Real
The main advantage of trading using opposite FlexShares STOXX and FlexShares Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, FlexShares Real 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 Real will offset losses from the drop in FlexShares Real's long position.| FlexShares STOXX vs. iShares MSCI Emerging | FlexShares STOXX vs. BMO Long Federal | FlexShares STOXX vs. iShares MSCI EAFE | FlexShares STOXX vs. Vanguard Total Market |
| FlexShares Real vs. WisdomTree Interest Rate | FlexShares Real vs. First Trust Developed | FlexShares Real vs. VictoryShares International Volatility |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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