Correlation Between IShares Core and FlexShares Morningstar
Can any of the company-specific risk be diversified away by investing in both IShares Core and FlexShares Morningstar 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 Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core SP and FlexShares Morningstar Market, you can compare the effects of market volatilities on IShares Core and FlexShares Morningstar 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 Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and FlexShares Morningstar.
Diversification Opportunities for IShares Core and FlexShares Morningstar
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and FlexShares Morningstar Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar 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 SP are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of IShares Core i.e., IShares Core and FlexShares Morningstar go up and down completely randomly.
Pair Corralation between IShares Core and FlexShares Morningstar
Considering the 90-day investment horizon iShares Core SP is expected to generate 0.93 times more return on investment than FlexShares Morningstar. However, iShares Core SP is 1.08 times less risky than FlexShares Morningstar. It trades about 0.13 of its potential returns per unit of risk. FlexShares Morningstar Market is currently generating about 0.12 per unit of risk. If you would invest 42,642 in iShares Core SP on September 2, 2024 and sell it today you would earn a total of 17,865 from holding iShares Core SP or generate 41.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Core SP vs. FlexShares Morningstar Market
Performance |
| Timeline |
| iShares Core SP |
| FlexShares Morningstar |
IShares Core and FlexShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Core and FlexShares Morningstar
The main advantage of trading using opposite IShares Core and FlexShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core position performs unexpectedly, FlexShares Morningstar 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 Morningstar will offset losses from the drop in FlexShares Morningstar's long position.| IShares Core vs. iShares Core SP | IShares Core vs. iShares Core SP | IShares Core vs. iShares SP 500 | IShares Core vs. iShares Russell 2000 |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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