Correlation Between FlexShares IBoxx and Schwab TIPS
Can any of the company-specific risk be diversified away by investing in both FlexShares IBoxx and Schwab TIPS 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 IBoxx and Schwab TIPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares iBoxx 5 Year and Schwab TIPS ETF, you can compare the effects of market volatilities on FlexShares IBoxx and Schwab TIPS 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 IBoxx with a short position of Schwab TIPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares IBoxx and Schwab TIPS.
Diversification Opportunities for FlexShares IBoxx and Schwab TIPS
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FlexShares and Schwab is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares iBoxx 5 Year and Schwab TIPS ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab TIPS ETF and FlexShares 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 FlexShares iBoxx 5 Year are associated (or correlated) with Schwab TIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab TIPS ETF has no effect on the direction of FlexShares IBoxx i.e., FlexShares IBoxx and Schwab TIPS go up and down completely randomly.
Pair Corralation between FlexShares IBoxx and Schwab TIPS
Given the investment horizon of 90 days FlexShares IBoxx is expected to generate 1.29 times less return on investment than Schwab TIPS. In addition to that, FlexShares IBoxx is 1.09 times more volatile than Schwab TIPS ETF. It trades about 0.44 of its total potential returns per unit of risk. Schwab TIPS ETF is currently generating about 0.61 per unit of volatility. If you would invest 2,569 in Schwab TIPS ETF on November 10, 2024 and sell it today you would earn a total of 63.00 from holding Schwab TIPS ETF or generate 2.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares iBoxx 5 Year vs. Schwab TIPS ETF
Performance |
| Timeline |
| FlexShares iBoxx 5 |
| Schwab TIPS ETF |
FlexShares IBoxx and Schwab TIPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares IBoxx and Schwab TIPS
The main advantage of trading using opposite FlexShares IBoxx and Schwab TIPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares IBoxx position performs unexpectedly, Schwab TIPS 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 Schwab TIPS will offset losses from the drop in Schwab TIPS's long position.| FlexShares IBoxx vs. Vanguard Short Term Inflation Protected | FlexShares IBoxx vs. iShares TIPS Bond | FlexShares IBoxx vs. Invesco PureBeta 0 5 | FlexShares IBoxx vs. Goldman Sachs Access |
| Schwab TIPS vs. Schwab Intermediate Term Treasury | Schwab TIPS vs. Schwab Aggregate Bond | Schwab TIPS vs. Schwab International Equity | Schwab TIPS vs. Schwab Emerging Markets |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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