Correlation Between FlexShares IBoxx and AdvisorShares
Can any of the company-specific risk be diversified away by investing in both FlexShares IBoxx and AdvisorShares 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 AdvisorShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares iBoxx 3 Year and AdvisorShares, you can compare the effects of market volatilities on FlexShares IBoxx and AdvisorShares 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 AdvisorShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares IBoxx and AdvisorShares.
Diversification Opportunities for FlexShares IBoxx and AdvisorShares
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between FlexShares and AdvisorShares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares iBoxx 3 Year and AdvisorShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares 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 3 Year are associated (or correlated) with AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares has no effect on the direction of FlexShares IBoxx i.e., FlexShares IBoxx and AdvisorShares go up and down completely randomly.
Pair Corralation between FlexShares IBoxx and AdvisorShares
Given the investment horizon of 90 days FlexShares IBoxx is expected to generate 1.44 times less return on investment than AdvisorShares. In addition to that, FlexShares IBoxx is 1.38 times more volatile than AdvisorShares. It trades about 0.09 of its total potential returns per unit of risk. AdvisorShares is currently generating about 0.19 per unit of volatility. If you would invest 4,454 in AdvisorShares on August 31, 2024 and sell it today you would earn a total of 38.00 from holding AdvisorShares or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.56% |
| Values | Daily Returns |
FlexShares iBoxx 3 Year vs. AdvisorShares
Performance |
| Timeline |
| FlexShares iBoxx 3 |
| AdvisorShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
FlexShares IBoxx and AdvisorShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares IBoxx and AdvisorShares
The main advantage of trading using opposite FlexShares IBoxx and AdvisorShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares IBoxx position performs unexpectedly, AdvisorShares 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 AdvisorShares will offset losses from the drop in AdvisorShares' long position.| FlexShares IBoxx vs. SPDR Bloomberg 1 10 | FlexShares IBoxx vs. FlexShares iBoxx 5 Year | FlexShares IBoxx vs. Goldman Sachs Access |
| AdvisorShares vs. Vanguard Intermediate Term Corporate | AdvisorShares vs. Vanguard Short Term Bond | AdvisorShares vs. Vanguard Long Term Corporate | AdvisorShares vs. Vanguard Short Term Treasury |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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