Correlation Between FlexShares Real and FlexShares Disciplined

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

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

Diversification Opportunities for FlexShares Real and FlexShares Disciplined

0.65

Correlation Coefficient

FlexShares Real  FlexShares Disciplined

Poor diversification

The 3 months correlation between FlexShares and FlexShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Real Assets and FlexShares Disciplined Duratio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Disciplined and FlexShares Real 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 Real Assets are associated (or correlated) with FlexShares Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Disciplined has no effect on the direction of FlexShares Real i.e., FlexShares Real and FlexShares Disciplined go up and down completely randomly.

Pair Corralation between FlexShares Real and FlexShares Disciplined

Given the investment horizon of 90 days FlexShares Real Assets is expected to generate 1.99 times more return on investment than FlexShares Disciplined. However, FlexShares Real is 1.99 times more volatile than FlexShares Disciplined Duration. It trades about 0.03 of its potential returns per unit of risk. FlexShares Disciplined Duration is currently generating about 0.04 per unit of risk. If you would invest  2,874  in FlexShares Real Assets on September 17, 2024 and sell it today you would earn a total of  244.81  from holding FlexShares Real Assets or generate 8.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

FlexShares Real Assets  vs.  FlexShares Disciplined Duratio

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.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FlexShares Real and FlexShares Disciplined

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

The idea behind FlexShares Real Assets and FlexShares Disciplined Duration 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.