Correlation Between SPDR Bloomberg and FlexShares STOXX

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

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

Diversification Opportunities for SPDR Bloomberg and FlexShares STOXX

0.45

Correlation Coefficient

SPDR Bloomberg  FlexShares STOXX

Very weak diversification

The 3 months correlation between SPDR and FlexShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Barclays and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global and SPDR Bloomberg 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 SPDR Bloomberg Barclays are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of SPDR Bloomberg i.e., SPDR Bloomberg and FlexShares STOXX go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and FlexShares STOXX

Given the investment horizon of 90 days SPDR Bloomberg Barclays is expected to generate 0.42 times more return on investment than FlexShares STOXX. However, SPDR Bloomberg Barclays is 2.36 times less risky than FlexShares STOXX. It trades about 0.1 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.01 per unit of risk. If you would invest  2,362  in SPDR Bloomberg Barclays on December 29, 2024 and sell it today you would earn a total of  50.00  from holding SPDR Bloomberg Barclays or generate 2.12% return on investment over 90 days.

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

SPDR Bloomberg Barclays  vs.  FlexShares STOXX Global

SPDR Bloomberg Barclays

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Barclays are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FlexShares STOXX Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days FlexShares STOXX Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, FlexShares STOXX is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPDR Bloomberg and FlexShares STOXX

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

The idea behind SPDR Bloomberg Barclays and FlexShares STOXX Global 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.