Correlation Between FlexShares Disciplined and US Treasury

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

By analyzing existing cross correlation between FlexShares Disciplined Duration and US Treasury 5, you can compare the effects of market volatilities on FlexShares Disciplined and US Treasury 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 Disciplined with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Disciplined and US Treasury.

Diversification Opportunities for FlexShares Disciplined and US Treasury

0.98

Correlation Coefficient

FlexShares Disciplined  US Treasury

Almost no diversification

The 3 months correlation between FlexShares and UFIV is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Disciplined Duratio and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 and FlexShares Disciplined 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 Disciplined Duration are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of FlexShares Disciplined i.e., FlexShares Disciplined and US Treasury go up and down completely randomly.

Pair Corralation between FlexShares Disciplined and US Treasury

Given the investment horizon of 90 days FlexShares Disciplined Duration is expected to generate 1.35 times more return on investment than US Treasury. However, FlexShares Disciplined is 1.35 times more volatile than US Treasury 5. It trades about -0.06 of its potential returns per unit of risk. US Treasury 5 is currently generating about -0.13 per unit of risk. If you would invest  2,079  in FlexShares Disciplined Duration on September 12, 2024 and sell it today you would lose (25.00) from holding FlexShares Disciplined Duration or give up 1.2% of portfolio value over 90 days.

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

FlexShares Disciplined Duratio  vs.  US Treasury 5

FlexShares Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Disciplined Duration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FlexShares Disciplined is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with FlexShares Disciplined and US Treasury

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

The idea behind FlexShares Disciplined Duration and US Treasury 5 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.