Correlation Between FlexShares Morningstar and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both FlexShares Morningstar and IShares 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 IShares 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 iShares MSCI Frontier, you can compare the effects of market volatilities on FlexShares Morningstar and IShares 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Morningstar and IShares MSCI.
Diversification Opportunities for FlexShares Morningstar and IShares MSCI
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FlexShares and IShares is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Emergin and iShares MSCI Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Frontier 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Frontier has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and IShares MSCI go up and down completely randomly.
Pair Corralation between FlexShares Morningstar and IShares MSCI
Given the investment horizon of 90 days FlexShares Morningstar Emerging is expected to generate 1.75 times more return on investment than IShares MSCI. However, FlexShares Morningstar is 1.75 times more volatile than iShares MSCI Frontier. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI Frontier is currently generating about 0.08 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Morningstar Emergin vs. iShares MSCI Frontier
Performance |
| Timeline |
| FlexShares Morningstar |
| iShares MSCI Frontier |
FlexShares Morningstar and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Morningstar and IShares MSCI
The main advantage of trading using opposite FlexShares Morningstar and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Morningstar position performs unexpectedly, IShares 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind FlexShares Morningstar Emerging and iShares MSCI Frontier 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.
| IShares MSCI vs. Xtrackers MSCI Emerging | IShares MSCI vs. FlexShares Morningstar Emerging | IShares MSCI vs. First Trust Emerging |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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