Correlation Between FlexShares High and IShares Edge
Can any of the company-specific risk be diversified away by investing in both FlexShares High and IShares Edge 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 High and IShares Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares High Yield and iShares Edge High, you can compare the effects of market volatilities on FlexShares High and IShares Edge 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 High with a short position of IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares High and IShares Edge.
Diversification Opportunities for FlexShares High and IShares Edge
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between FlexShares and IShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares High Yield and iShares Edge High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge High and FlexShares High 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 High Yield are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge High has no effect on the direction of FlexShares High i.e., FlexShares High and IShares Edge go up and down completely randomly.
Pair Corralation between FlexShares High and IShares Edge
Given the investment horizon of 90 days FlexShares High is expected to generate 1.23 times less return on investment than IShares Edge. But when comparing it to its historical volatility, FlexShares High Yield is 1.06 times less risky than IShares Edge. It trades about 0.15 of its potential returns per unit of risk. iShares Edge High is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,396 in iShares Edge High on September 1, 2024 and sell it today you would earn a total of 399.00 from holding iShares Edge High or generate 9.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares High Yield vs. iShares Edge High
Performance |
| Timeline |
| FlexShares High Yield |
| iShares Edge High |
FlexShares High and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares High and IShares Edge
The main advantage of trading using opposite FlexShares High and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares High position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| FlexShares High vs. Xtrackers High Beta | FlexShares High vs. iShares Edge High | FlexShares High vs. Xtrackers USD High | FlexShares High vs. iShares Interest Rate |
| IShares Edge vs. iShares Edge Investment | IShares Edge vs. iShares Interest Rate | IShares Edge vs. iShares Fallen Angels | IShares Edge vs. iShares Intl High |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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