Correlation Between IShares Expanded and FlexShares International

Can any of the company-specific risk be diversified away by investing in both IShares Expanded and FlexShares International 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 Expanded and FlexShares International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Expanded Tech Software and FlexShares International Quality, you can compare the effects of market volatilities on IShares Expanded and FlexShares International 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 Expanded with a short position of FlexShares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Expanded and FlexShares International.

Diversification Opportunities for IShares Expanded and FlexShares International

-0.43

Correlation Coefficient

IShares Expanded  FlexShares International

Very good diversification

The 3 months correlation between IShares and FlexShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and FlexShares International Quali in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares International and IShares Expanded 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 Expanded Tech Software are associated (or correlated) with FlexShares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares International has no effect on the direction of IShares Expanded i.e., IShares Expanded and FlexShares International go up and down completely randomly.

Pair Corralation between IShares Expanded and FlexShares International

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to generate 1.16 times more return on investment than FlexShares International. However, IShares Expanded is 1.16 times more volatile than FlexShares International Quality. It trades about 0.24 of its potential returns per unit of risk. FlexShares International Quality is currently generating about -0.06 per unit of risk. If you would invest  8,680  in iShares Expanded Tech Software on August 30, 2024 and sell it today you would earn a total of  1,750  from holding iShares Expanded Tech Software or generate 20.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Expanded Tech Software  vs.  FlexShares International Quali

iShares Expanded Tech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, IShares Expanded showed solid returns over the last few months and may actually be approaching a breakup point.

FlexShares International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares International Quality has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, FlexShares International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Expanded and FlexShares International

The main advantage of trading using opposite IShares Expanded and FlexShares International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded position performs unexpectedly, FlexShares International 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 International will offset losses from the drop in FlexShares International's long position.

The idea behind iShares Expanded Tech Software and FlexShares International Quality 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.