Correlation Between FlexShares Quality and Barclays ETN

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

By analyzing existing cross correlation between FlexShares Quality Dividend and Barclays ETN Select, you can compare the effects of market volatilities on FlexShares Quality and Barclays ETN 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 Quality with a short position of Barclays ETN. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Quality and Barclays ETN.

Diversification Opportunities for FlexShares Quality and Barclays ETN

0.77

Correlation Coefficient

FlexShares Quality  Barclays ETN

Poor diversification

The 3 months correlation between FlexShares and Barclays is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Quality Dividend and Barclays ETN Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays ETN Select and FlexShares Quality 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 Quality Dividend are associated (or correlated) with Barclays ETN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays ETN Select has no effect on the direction of FlexShares Quality i.e., FlexShares Quality and Barclays ETN go up and down completely randomly.

Pair Corralation between FlexShares Quality and Barclays ETN

Given the investment horizon of 90 days FlexShares Quality is expected to generate 2.63 times less return on investment than Barclays ETN. But when comparing it to its historical volatility, FlexShares Quality Dividend is 1.57 times less risky than Barclays ETN. It trades about 0.19 of its potential returns per unit of risk. Barclays ETN Select is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  2,545  in Barclays ETN Select on September 2, 2024 and sell it today you would earn a total of  483.00  from holding Barclays ETN Select or generate 18.98% return on investment over 90 days.

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

FlexShares Quality Dividend  vs.  Barclays ETN Select

FlexShares Quality

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Quality Dividend are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, FlexShares Quality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Barclays ETN Select

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FlexShares Quality and Barclays ETN

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

The idea behind FlexShares Quality Dividend and Barclays ETN Select 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.