Correlation Between FlexShares Morningstar and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both FlexShares Morningstar and ProShares MSCI 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 Morningstar and ProShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Morningstar Emerging and ProShares MSCI Emerging, you can compare the effects of market volatilities on FlexShares Morningstar and ProShares MSCI 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 Morningstar with a short position of ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Morningstar and ProShares MSCI.
Diversification Opportunities for FlexShares Morningstar and ProShares MSCI
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FlexShares and ProShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Emergin and ProShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Emerging and FlexShares Morningstar 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 Morningstar Emerging are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Emerging has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and ProShares MSCI go up and down completely randomly.
Pair Corralation between FlexShares Morningstar and ProShares MSCI
Given the investment horizon of 90 days FlexShares Morningstar Emerging is expected to generate 0.84 times more return on investment than ProShares MSCI. However, FlexShares Morningstar Emerging is 1.19 times less risky than ProShares MSCI. It trades about 0.05 of its potential returns per unit of risk. ProShares MSCI Emerging is currently generating about 0.03 per unit of risk. If you would invest 4,855 in FlexShares Morningstar Emerging on September 2, 2024 and sell it today you would earn a total of 522.00 from holding FlexShares Morningstar Emerging or generate 10.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Morningstar Emergin vs. ProShares MSCI Emerging
Performance |
| Timeline |
| FlexShares Morningstar |
| ProShares MSCI Emerging |
FlexShares Morningstar and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Morningstar and ProShares MSCI
The main advantage of trading using opposite FlexShares Morningstar and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Morningstar position performs unexpectedly, ProShares MSCI 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 ProShares MSCI will offset losses from the drop in ProShares MSCI's long position.The idea behind FlexShares Morningstar Emerging and ProShares MSCI Emerging pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| ProShares MSCI vs. ProShares MSCI EAFE | ProShares MSCI vs. ProShares MSCI Europe | ProShares MSCI vs. ProShares Russell 2000 | ProShares MSCI vs. ProShares SP MidCap |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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