Correlation Between FlexShares STOXX and IShares Global
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and IShares Global 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 IShares Global 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 iShares Global Materials, you can compare the effects of market volatilities on FlexShares STOXX and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and IShares Global.
Diversification Opportunities for FlexShares STOXX and IShares Global
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and iShares Global Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Materials 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Materials has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and IShares Global go up and down completely randomly.
Pair Corralation between FlexShares STOXX and IShares Global
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.5 times more return on investment than IShares Global. However, FlexShares STOXX Global is 2.0 times less risky than IShares Global. It trades about 0.22 of its potential returns per unit of risk. iShares Global Materials is currently generating about -0.07 per unit of risk. If you would invest 5,770 in FlexShares STOXX Global on September 1, 2024 and sell it today you would earn a total of 131.00 from holding FlexShares STOXX Global or generate 2.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
FlexShares STOXX Global vs. iShares Global Materials
Performance |
| Timeline |
| FlexShares STOXX Global |
| iShares Global Materials |
FlexShares STOXX and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares STOXX and IShares Global
The main advantage of trading using opposite FlexShares STOXX and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.| FlexShares STOXX vs. VanEck Vectors ETF | FlexShares STOXX vs. Global X Wind | FlexShares STOXX vs. Invesco Electric Vehicle | FlexShares STOXX vs. Global X Disruptive |
| IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Utilities | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Consumer |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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