Correlation Between Direxion and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both Direxion 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 Direxion and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion and FlexShares ESG Climate, you can compare the effects of market volatilities on Direxion 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 Direxion with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion and FlexShares ESG.
Diversification Opportunities for Direxion and FlexShares ESG
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direxion and FlexShares is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Direxion 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 Direxion 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 Direxion 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 Direxion i.e., Direxion and FlexShares ESG go up and down completely randomly.
Pair Corralation between Direxion and FlexShares ESG
If you would invest 5,024 in FlexShares ESG Climate on September 1, 2024 and sell it today you would lose (22.00) from holding FlexShares ESG Climate or give up 0.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 0.79% |
| Values | Daily Returns |
Direxion vs. FlexShares ESG Climate
Performance |
| Timeline |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| FlexShares ESG Climate |
Direxion and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion and FlexShares ESG
The main advantage of trading using opposite Direxion and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion 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.The idea behind Direxion and FlexShares ESG Climate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| FlexShares ESG vs. iShares ESG Aggregate | FlexShares ESG vs. SPDR MSCI Emerging | FlexShares ESG vs. Aquagold International | FlexShares ESG vs. Thrivent High Yield |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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