Correlation Between FlexShares Morningstar and Global X

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

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

Diversification Opportunities for FlexShares Morningstar and Global X

0.69

Correlation Coefficient

FlexShares Morningstar  Global X

Poor diversification

The 3 months correlation between FlexShares and Global is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Develop and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI and FlexShares Morningstar 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 Morningstar Developed are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and Global X go up and down completely randomly.

Pair Corralation between FlexShares Morningstar and Global X

Given the investment horizon of 90 days FlexShares Morningstar Developed is expected to under-perform the Global X. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares Morningstar Developed is 1.93 times less risky than Global X. The etf trades about -0.01 of its potential returns per unit of risk. The Global X MSCI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,392  in Global X MSCI on September 13, 2024 and sell it today you would earn a total of  123.99  from holding Global X MSCI or generate 5.18% return on investment over 90 days.

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

FlexShares Morningstar Develop  vs.  Global X MSCI

FlexShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global X MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Morningstar and Global X

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

The idea behind FlexShares Morningstar Developed and Global X MSCI 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.