Correlation Between SPDR MSCI and FlexShares Quality
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and FlexShares Quality 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 SPDR MSCI and FlexShares Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI USA and FlexShares Quality Dividend, you can compare the effects of market volatilities on SPDR MSCI and FlexShares Quality 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 SPDR MSCI with a short position of FlexShares Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and FlexShares Quality.
Diversification Opportunities for SPDR MSCI and FlexShares Quality
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SPDR and FlexShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI USA and FlexShares Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Quality and SPDR MSCI 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 SPDR MSCI USA are associated (or correlated) with FlexShares Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Quality has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and FlexShares Quality go up and down completely randomly.
Pair Corralation between SPDR MSCI and FlexShares Quality
Considering the 90-day investment horizon SPDR MSCI USA is expected to generate 1.1 times more return on investment than FlexShares Quality. However, SPDR MSCI is 1.1 times more volatile than FlexShares Quality Dividend. It trades about 0.16 of its potential returns per unit of risk. FlexShares Quality Dividend is currently generating about 0.13 per unit of risk. If you would invest 15,768 in SPDR MSCI USA on August 26, 2024 and sell it today you would earn a total of 424.00 from holding SPDR MSCI USA or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR MSCI USA vs. FlexShares Quality Dividend
Performance |
| Timeline |
| SPDR MSCI USA |
| FlexShares Quality |
SPDR MSCI and FlexShares Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and FlexShares Quality
The main advantage of trading using opposite SPDR MSCI and FlexShares Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, FlexShares Quality 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 Quality will offset losses from the drop in FlexShares Quality's long position.| SPDR MSCI vs. SPDR SSGA Large | SPDR MSCI vs. SPDR MSCI EAFE | SPDR MSCI vs. SPDR MSCI Emerging | SPDR MSCI vs. SPDR Russell 1000 |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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