Correlation Between IShares Core and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and FlexShares ESG Climate, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and FlexShares ESG.
Diversification Opportunities for IShares Core and FlexShares ESG
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI 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 IShares Core 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 iShares Core MSCI 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 IShares Core i.e., IShares Core and FlexShares ESG go up and down completely randomly.
Pair Corralation between IShares Core and FlexShares ESG
Given the investment horizon of 90 days IShares Core is expected to generate 1.01 times less return on investment than FlexShares ESG. In addition to that, IShares Core is 1.03 times more volatile than FlexShares ESG Climate. It trades about 0.05 of its total potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.06 per unit of volatility. If you would invest 4,461 in FlexShares ESG Climate on August 26, 2024 and sell it today you would earn a total of 472.00 from holding FlexShares ESG Climate or generate 10.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core MSCI vs. FlexShares ESG Climate
Performance |
| Timeline |
| iShares Core MSCI |
| FlexShares ESG Climate |
IShares Core and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and FlexShares ESG
The main advantage of trading using opposite IShares Core and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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.| IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP |
| FlexShares ESG vs. Dimensional Core Equity | FlexShares ESG vs. Dimensional Emerging Core | FlexShares ESG vs. Dimensional Targeted Value | FlexShares ESG vs. Dimensional Small Cap |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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