Correlation Between FlexShares International and IShares International
Can any of the company-specific risk be diversified away by investing in both FlexShares International and IShares International 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 IShares International 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 iShares International Select, you can compare the effects of market volatilities on FlexShares International and IShares International 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 IShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares International and IShares International.
Diversification Opportunities for FlexShares International and IShares International
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FlexShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares International Quali and iShares International Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares International 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 IShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares International has no effect on the direction of FlexShares International i.e., FlexShares International and IShares International go up and down completely randomly.
Pair Corralation between FlexShares International and IShares International
Given the investment horizon of 90 days FlexShares International Quality is expected to under-perform the IShares International. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares International Quality is 1.02 times less risky than IShares International. The etf trades about -0.15 of its potential returns per unit of risk. The iShares International Select is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 2,912 in iShares International Select on August 24, 2024 and sell it today you would lose (77.00) from holding iShares International Select or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares International Quali vs. iShares International Select
Performance |
| Timeline |
| FlexShares International |
| iShares International |
FlexShares International and IShares International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares International and IShares International
The main advantage of trading using opposite FlexShares International and IShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares International position performs unexpectedly, IShares International 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 International will offset losses from the drop in IShares International's long position.| FlexShares International vs. FlexShares International Quality | FlexShares International vs. ALPS International Sector | FlexShares International vs. FlexShares Quality Dividend |
| IShares International vs. FlexShares International Quality | IShares International vs. ALPS International Sector | IShares International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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