Correlation Between IShares Core and FlexShares Emerging
Can any of the company-specific risk be diversified away by investing in both IShares Core and FlexShares Emerging 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 Emerging 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 Emerging Markets, you can compare the effects of market volatilities on IShares Core and FlexShares Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and FlexShares Emerging.
Diversification Opportunities for IShares Core and FlexShares Emerging
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and FlexShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and FlexShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Emerging 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Emerging has no effect on the direction of IShares Core i.e., IShares Core and FlexShares Emerging go up and down completely randomly.
Pair Corralation between IShares Core and FlexShares Emerging
Given the investment horizon of 90 days IShares Core is expected to generate 1.47 times less return on investment than FlexShares Emerging. In addition to that, IShares Core is 1.51 times more volatile than FlexShares Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. FlexShares Emerging Markets is currently generating about 0.06 per unit of volatility. If you would invest 2,441 in FlexShares Emerging Markets on September 1, 2024 and sell it today you would earn a total of 134.00 from holding FlexShares Emerging Markets or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
iShares Core MSCI vs. FlexShares Emerging Markets
Performance |
| Timeline |
| iShares Core MSCI |
| FlexShares Emerging |
IShares Core and FlexShares Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and FlexShares Emerging
The main advantage of trading using opposite IShares Core and FlexShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, FlexShares Emerging 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 Emerging will offset losses from the drop in FlexShares Emerging's long position.| IShares Core vs. Xtrackers MSCI Emerging | IShares Core vs. FlexShares Morningstar Emerging | IShares Core vs. First Trust Emerging |
| FlexShares Emerging vs. Xtrackers MSCI Emerging | FlexShares Emerging vs. FlexShares Morningstar Emerging | FlexShares Emerging vs. First Trust Emerging |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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