Correlation Between FlexShares ESG and IShares ESG
Can any of the company-specific risk be diversified away by investing in both FlexShares ESG and IShares 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 FlexShares ESG and IShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares ESG Climate and iShares ESG Advanced, you can compare the effects of market volatilities on FlexShares ESG and IShares 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 FlexShares ESG with a short position of IShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares ESG and IShares ESG.
Diversification Opportunities for FlexShares ESG and IShares ESG
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FlexShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares ESG Climate and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced and FlexShares ESG 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 ESG Climate are associated (or correlated) with IShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of FlexShares ESG i.e., FlexShares ESG and IShares ESG go up and down completely randomly.
Pair Corralation between FlexShares ESG and IShares ESG
Given the investment horizon of 90 days FlexShares ESG Climate is expected to generate 1.67 times more return on investment than IShares ESG. However, FlexShares ESG is 1.67 times more volatile than iShares ESG Advanced. It trades about 0.09 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.11 per unit of risk. If you would invest 4,091 in FlexShares ESG Climate on August 26, 2024 and sell it today you would earn a total of 842.00 from holding FlexShares ESG Climate or generate 20.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares ESG Climate vs. iShares ESG Advanced
Performance |
| Timeline |
| FlexShares ESG Climate |
| iShares ESG Advanced |
FlexShares ESG and IShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares ESG and IShares ESG
The main advantage of trading using opposite FlexShares ESG and IShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares ESG position performs unexpectedly, IShares 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 IShares ESG will offset losses from the drop in IShares ESG's long position.| FlexShares ESG vs. Dimensional Core Equity | FlexShares ESG vs. Dimensional Emerging Core | FlexShares ESG vs. Dimensional Targeted Value | FlexShares ESG vs. Dimensional Small Cap |
| IShares ESG vs. Senstar Technologies | IShares ESG vs. ImmuCell | IShares ESG vs. Anika Therapeutics | IShares ESG vs. Aquagold International |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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