Correlation Between IShares MSCI and FlexShares Developed
Can any of the company-specific risk be diversified away by investing in both IShares MSCI and FlexShares Developed 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 MSCI and FlexShares Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Intl and FlexShares Developed Markets, you can compare the effects of market volatilities on IShares MSCI and FlexShares Developed 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 MSCI with a short position of FlexShares Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and FlexShares Developed.
Diversification Opportunities for IShares MSCI and FlexShares Developed
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and FlexShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Intl and FlexShares Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Developed and IShares MSCI 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 MSCI Intl are associated (or correlated) with FlexShares Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Developed has no effect on the direction of IShares MSCI i.e., IShares MSCI and FlexShares Developed go up and down completely randomly.
Pair Corralation between IShares MSCI and FlexShares Developed
Given the investment horizon of 90 days iShares MSCI Intl is expected to generate 1.46 times more return on investment than FlexShares Developed. However, IShares MSCI is 1.46 times more volatile than FlexShares Developed Markets. It trades about 0.06 of its potential returns per unit of risk. FlexShares Developed Markets is currently generating about 0.06 per unit of risk. If you would invest 2,997 in iShares MSCI Intl on September 14, 2024 and sell it today you would earn a total of 914.00 from holding iShares MSCI Intl or generate 30.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI Intl vs. FlexShares Developed Markets
Performance |
| Timeline |
| iShares MSCI Intl |
| FlexShares Developed |
IShares MSCI and FlexShares Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and FlexShares Developed
The main advantage of trading using opposite IShares MSCI and FlexShares Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, FlexShares Developed 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 Developed will offset losses from the drop in FlexShares Developed's long position.| IShares MSCI vs. iShares MSCI Intl | IShares MSCI vs. iShares Edge MSCI | IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Intl |
| FlexShares Developed vs. iShares MSCI Intl | FlexShares Developed vs. iShares MSCI Intl | FlexShares Developed vs. iShares Currency Hedged | FlexShares Developed vs. iShares Edge MSCI |
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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