Correlation Between FlexShares International and FlexShares Global
Can any of the company-specific risk be diversified away by investing in both FlexShares International and FlexShares Global 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 International and FlexShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares International Quality and FlexShares Global Quality, you can compare the effects of market volatilities on FlexShares International and FlexShares Global 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 International with a short position of FlexShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares International and FlexShares Global.
Diversification Opportunities for FlexShares International and FlexShares Global
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FlexShares and FlexShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares International Quali and FlexShares Global Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Global Quality and FlexShares International 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 International Quality are associated (or correlated) with FlexShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Global Quality has no effect on the direction of FlexShares International i.e., FlexShares International and FlexShares Global go up and down completely randomly.
Pair Corralation between FlexShares International and FlexShares Global
Given the investment horizon of 90 days FlexShares International Quality is expected to under-perform the FlexShares Global. In addition to that, FlexShares International is 1.01 times more volatile than FlexShares Global Quality. It trades about -0.19 of its total potential returns per unit of risk. FlexShares Global Quality is currently generating about 0.13 per unit of volatility. If you would invest 6,094 in FlexShares Global Quality on August 30, 2024 and sell it today you would earn a total of 143.00 from holding FlexShares Global Quality or generate 2.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares International Quali vs. FlexShares Global Quality
Performance |
| Timeline |
| FlexShares International |
| FlexShares Global Quality |
FlexShares International and FlexShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares International and FlexShares Global
The main advantage of trading using opposite FlexShares International and FlexShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares International position performs unexpectedly, FlexShares Global 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 Global will offset losses from the drop in FlexShares Global's long position.The idea behind FlexShares International Quality and FlexShares Global Quality 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 Global vs. FlexShares International Quality | FlexShares Global vs. FlexShares International Quality | FlexShares Global vs. IQ Real Estate | FlexShares Global vs. FlexShares Quality Dividend |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Commodity Directory Find actively traded commodities issued by global exchanges |