Correlation Between IShares Emergent and FlexShares Real

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

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

Diversification Opportunities for IShares Emergent and FlexShares Real

0.47

Correlation Coefficient

IShares Emergent  FlexShares Real

Very weak diversification

The 3 months correlation between IShares and FlexShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares Emergent Food and FlexShares Real Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Real Assets and IShares Emergent 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 Emergent Food are associated (or correlated) with FlexShares Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Real Assets has no effect on the direction of IShares Emergent i.e., IShares Emergent and FlexShares Real go up and down completely randomly.

Pair Corralation between IShares Emergent and FlexShares Real

Given the investment horizon of 90 days iShares Emergent Food is expected to generate 1.43 times more return on investment than FlexShares Real. However, IShares Emergent is 1.43 times more volatile than FlexShares Real Assets. It trades about 0.09 of its potential returns per unit of risk. FlexShares Real Assets is currently generating about -0.03 per unit of risk. If you would invest  1,978  in iShares Emergent Food on September 12, 2024 and sell it today you would earn a total of  88.00  from holding iShares Emergent Food or generate 4.45% return on investment over 90 days.

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

iShares Emergent Food  vs.  FlexShares Real Assets

iShares Emergent Food

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Emergent Food are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Emergent is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

FlexShares Real Assets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Real Assets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, FlexShares Real is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Emergent and FlexShares Real

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

The idea behind iShares Emergent Food and FlexShares Real Assets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.