Correlation Between SPDR SP and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and FlexShares ESG Climate, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and FlexShares ESG.
Diversification Opportunities for SPDR SP and FlexShares ESG
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SPDR and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SP 500 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 SPDR SP i.e., SPDR SP and FlexShares ESG go up and down completely randomly.
Pair Corralation between SPDR SP and FlexShares ESG
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 0.99 times more return on investment than FlexShares ESG. However, SPDR SP 500 is 1.01 times less risky than FlexShares ESG. It trades about 0.14 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.13 per unit of risk. If you would invest 52,449 in SPDR SP 500 on September 1, 2024 and sell it today you would earn a total of 7,806 from holding SPDR SP 500 or generate 14.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
SPDR SP 500 vs. FlexShares ESG Climate
Performance |
| Timeline |
| SPDR SP 500 |
| FlexShares ESG Climate |
SPDR SP and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and FlexShares ESG
The main advantage of trading using opposite SPDR SP and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging | SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class |
| FlexShares ESG vs. Vanguard Total Stock | FlexShares ESG vs. SPDR SP 500 | FlexShares ESG vs. iShares Core SP | FlexShares ESG vs. Vanguard Dividend Appreciation |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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