Correlation Between FlexShares STOXX and First Trust
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and First Trust 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 First Trust 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 First Trust RiverFront, you can compare the effects of market volatilities on FlexShares STOXX and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and First Trust.
Diversification Opportunities for FlexShares STOXX and First Trust
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust RiverFront has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and First Trust go up and down completely randomly.
Pair Corralation between FlexShares STOXX and First Trust
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.73 times more return on investment than First Trust. However, FlexShares STOXX Global is 1.37 times less risky than First Trust. It trades about 0.11 of its potential returns per unit of risk. First Trust RiverFront is currently generating about 0.07 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares STOXX Global vs. First Trust RiverFront
Performance |
| Timeline |
| FlexShares STOXX Global |
| First Trust RiverFront |
FlexShares STOXX and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and First Trust
The main advantage of trading using opposite FlexShares STOXX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. Invesco PureBeta MSCI | First Trust vs. Aquagold International | First Trust vs. Morningstar Unconstrained Allocation | First Trust vs. High Yield Municipal Fund |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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