Correlation Between FlexShares STOXX and FlexShares Disciplined
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and FlexShares Disciplined 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 Disciplined 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 Disciplined Duration, you can compare the effects of market volatilities on FlexShares STOXX and FlexShares Disciplined 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 Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and FlexShares Disciplined.
Diversification Opportunities for FlexShares STOXX and FlexShares Disciplined
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between FlexShares and FlexShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and FlexShares Disciplined Duratio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Disciplined 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 Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Disciplined has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and FlexShares Disciplined go up and down completely randomly.
Pair Corralation between FlexShares STOXX and FlexShares Disciplined
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 1.96 times more return on investment than FlexShares Disciplined. However, FlexShares STOXX is 1.96 times more volatile than FlexShares Disciplined Duration. It trades about 0.11 of its potential returns per unit of risk. FlexShares Disciplined Duration is currently generating about 0.06 per unit of risk. If you would invest 14,132 in FlexShares STOXX Global on August 29, 2024 and sell it today you would earn a total of 3,084 from holding FlexShares STOXX Global or generate 21.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares STOXX Global vs. FlexShares Disciplined Duratio
Performance |
| Timeline |
| FlexShares STOXX Global |
| FlexShares Disciplined |
FlexShares STOXX and FlexShares Disciplined Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and FlexShares Disciplined
The main advantage of trading using opposite FlexShares STOXX and FlexShares Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, FlexShares Disciplined 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 Disciplined will offset losses from the drop in FlexShares Disciplined'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 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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