Correlation Between FlexShares STOXX and SPDR Kensho

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

By analyzing existing cross correlation between FlexShares STOXX Global and SPDR Kensho Intelligent, you can compare the effects of market volatilities on FlexShares STOXX and SPDR Kensho 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 STOXX with a short position of SPDR Kensho. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and SPDR Kensho.

Diversification Opportunities for FlexShares STOXX and SPDR Kensho

-0.14

Correlation Coefficient

FlexShares STOXX  SPDR Kensho

Good diversification

The 3 months correlation between FlexShares and SPDR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and SPDR Kensho Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Intelligent and FlexShares STOXX 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 STOXX Global are associated (or correlated) with SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Intelligent has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and SPDR Kensho go up and down completely randomly.

Pair Corralation between FlexShares STOXX and SPDR Kensho

Given the investment horizon of 90 days FlexShares STOXX is expected to generate 10.05 times less return on investment than SPDR Kensho. But when comparing it to its historical volatility, FlexShares STOXX Global is 1.99 times less risky than SPDR Kensho. It trades about 0.04 of its potential returns per unit of risk. SPDR Kensho Intelligent is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,316  in SPDR Kensho Intelligent on September 4, 2024 and sell it today you would earn a total of  415.00  from holding SPDR Kensho Intelligent or generate 12.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

FlexShares STOXX Global  vs.  SPDR Kensho Intelligent

FlexShares STOXX Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, FlexShares STOXX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR Kensho Intelligent

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Kensho Intelligent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, SPDR Kensho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FlexShares STOXX and SPDR Kensho

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

The idea behind FlexShares STOXX Global and SPDR Kensho Intelligent 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.