Correlation Between FlexShares STOXX and First Trust
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and First Trust 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 STOXX and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares STOXX Global and First Trust NASDAQ, you can compare the effects of market volatilities on FlexShares STOXX and First Trust 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 STOXX with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and First Trust.
Diversification Opportunities for FlexShares STOXX and First Trust
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and First is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ and FlexShares STOXX 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 STOXX Global are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust NASDAQ has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and First Trust go up and down completely randomly.
Pair Corralation between FlexShares STOXX and First Trust
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.44 times more return on investment than First Trust. However, FlexShares STOXX Global is 2.29 times less risky than First Trust. It trades about 0.2 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.07 per unit of risk. If you would invest 5,439 in FlexShares STOXX Global on November 2, 2024 and sell it today you would earn a total of 153.00 from holding FlexShares STOXX Global or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares STOXX Global vs. First Trust NASDAQ
Performance |
| Timeline |
| FlexShares STOXX Global |
| First Trust NASDAQ |
FlexShares STOXX and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and First Trust
The main advantage of trading using opposite FlexShares STOXX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| FlexShares STOXX vs. ProShares DJ Brookfield | FlexShares STOXX vs. iShares Global Infrastructure | FlexShares STOXX vs. SPDR SP Global | FlexShares STOXX vs. iShares Infrastructure ETF |
| First Trust vs. First Trust Global | First Trust vs. Invesco Global Clean | First Trust vs. ALPS Clean Energy | First Trust vs. SPDR Kensho Clean |
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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