Correlation Between FlexShares International and FlexShares IBoxx
Can any of the company-specific risk be diversified away by investing in both FlexShares International and FlexShares IBoxx 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 IBoxx 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 iBoxx 3 Year, you can compare the effects of market volatilities on FlexShares International and FlexShares IBoxx 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 IBoxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares International and FlexShares IBoxx.
Diversification Opportunities for FlexShares International and FlexShares IBoxx
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FlexShares and FlexShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares International Quali and FlexShares iBoxx 3 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares iBoxx 3 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 IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares iBoxx 3 has no effect on the direction of FlexShares International i.e., FlexShares International and FlexShares IBoxx go up and down completely randomly.
Pair Corralation between FlexShares International and FlexShares IBoxx
Given the investment horizon of 90 days FlexShares International Quality is expected to under-perform the FlexShares IBoxx. In addition to that, FlexShares International is 8.66 times more volatile than FlexShares iBoxx 3 Year. It trades about -0.18 of its total potential returns per unit of risk. FlexShares iBoxx 3 Year is currently generating about 0.02 per unit of volatility. If you would invest 2,374 in FlexShares iBoxx 3 Year on August 26, 2024 and sell it today you would earn a total of 1.00 from holding FlexShares iBoxx 3 Year or generate 0.04% 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 iBoxx 3 Year
Performance |
| Timeline |
| FlexShares International |
| FlexShares iBoxx 3 |
FlexShares International and FlexShares IBoxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares International and FlexShares IBoxx
The main advantage of trading using opposite FlexShares International and FlexShares IBoxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares International position performs unexpectedly, FlexShares IBoxx 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 IBoxx will offset losses from the drop in FlexShares IBoxx's long position.The idea behind FlexShares International Quality and FlexShares iBoxx 3 Year 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 IBoxx vs. Schwab TIPS ETF | FlexShares IBoxx vs. Vanguard Short Term Inflation Protected | FlexShares IBoxx vs. iShares Floating Rate | FlexShares IBoxx vs. iShares 0 5 Year |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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