Correlation Between IShares Broad and FlexShares ESG
Can any of the company-specific risk be diversified away by investing in both IShares Broad 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 IShares Broad and FlexShares ESG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Broad USD and FlexShares ESG Climate, you can compare the effects of market volatilities on IShares Broad 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 IShares Broad with a short position of FlexShares ESG. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Broad and FlexShares ESG.
Diversification Opportunities for IShares Broad and FlexShares ESG
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and FlexShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Broad USD 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 IShares Broad 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 iShares Broad USD 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 IShares Broad i.e., IShares Broad and FlexShares ESG go up and down completely randomly.
Pair Corralation between IShares Broad and FlexShares ESG
Given the investment horizon of 90 days iShares Broad USD is expected to generate 0.96 times more return on investment than FlexShares ESG. However, iShares Broad USD is 1.04 times less risky than FlexShares ESG. It trades about 0.05 of its potential returns per unit of risk. FlexShares ESG Climate is currently generating about 0.04 per unit of risk. If you would invest 5,102 in iShares Broad USD on August 29, 2024 and sell it today you would earn a total of 23.00 from holding iShares Broad USD or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Broad USD vs. FlexShares ESG Climate
Performance |
| Timeline |
| iShares Broad USD |
| FlexShares ESG Climate |
IShares Broad and FlexShares ESG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Broad and FlexShares ESG
The main advantage of trading using opposite IShares Broad and FlexShares ESG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Broad 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.| IShares Broad vs. Schwab 1 5 Year | IShares Broad vs. Schwab Long Term Treasury | IShares Broad vs. Schwab Intermediate Term Treasury | IShares Broad vs. Schwab Short Term Treasury |
| FlexShares ESG vs. iShares ESG Advanced | FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. FlexShares ESG Climate | FlexShares ESG vs. Franklin Liberty Investment |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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