Correlation Between IShares IBoxx and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and FlexShares ESG 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 IBoxx and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares iBoxx Investment and FlexShares ESG Climate, you can compare the effects of market volatilities on IShares IBoxx and FlexShares ESG 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 IBoxx with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and FlexShares ESG.
Diversification Opportunities for IShares IBoxx and FlexShares ESG
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx Investment and FlexShares ESG Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares ESG Climate and IShares IBoxx 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 iBoxx Investment are associated (or correlated) with FlexShares ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares ESG Climate has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and FlexShares ESG go up and down completely randomly.
Pair Corralation between IShares IBoxx and FlexShares ESG
Considering the 90-day investment horizon iShares iBoxx Investment is expected to generate 1.28 times more return on investment than FlexShares ESG. However, IShares IBoxx is 1.28 times more volatile than FlexShares ESG Climate. It trades about 0.05 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.04 per unit of risk. If you would invest 10,883 in iShares iBoxx Investment on August 29, 2024 and sell it today you would earn a total of 64.00 from holding iShares iBoxx Investment or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares iBoxx Investment vs. FlexShares ESG Climate
Performance |
| Timeline |
| iShares iBoxx Investment |
| FlexShares ESG Climate |
IShares IBoxx and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares IBoxx and FlexShares ESG
The main advantage of trading using opposite IShares IBoxx and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, FlexShares ESG 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 ESG will offset losses from the drop in FlexShares ESG's long position.| IShares IBoxx vs. iShares iBoxx High | IShares IBoxx vs. iShares 1 3 Year | IShares IBoxx vs. iShares TIPS Bond | IShares IBoxx vs. iShares 7 10 Year |
| FlexShares ESG vs. iShares ESG Advanced | FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. Franklin Liberty Investment |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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