Correlation Between SPDR DoubleLine and FlexShares Core

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

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

Diversification Opportunities for SPDR DoubleLine and FlexShares Core

0.9

Correlation Coefficient

SPDR DoubleLine  FlexShares Core

Almost no diversification

The 3 months correlation between SPDR and FlexShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SPDR DoubleLine Emerging and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and SPDR DoubleLine 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 DoubleLine Emerging are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of SPDR DoubleLine i.e., SPDR DoubleLine and FlexShares Core go up and down completely randomly.

Pair Corralation between SPDR DoubleLine and FlexShares Core

Given the investment horizon of 90 days SPDR DoubleLine Emerging is expected to generate 0.63 times more return on investment than FlexShares Core. However, SPDR DoubleLine Emerging is 1.58 times less risky than FlexShares Core. It trades about -0.27 of its potential returns per unit of risk. FlexShares Core Select is currently generating about -0.35 per unit of risk. If you would invest  4,251  in SPDR DoubleLine Emerging on October 5, 2024 and sell it today you would lose (40.00) from holding SPDR DoubleLine Emerging or give up 0.94% of portfolio value over 90 days.

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

SPDR DoubleLine Emerging  vs.  FlexShares Core Select

SPDR DoubleLine Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR DoubleLine Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SPDR DoubleLine is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FlexShares Core Select

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SPDR DoubleLine and FlexShares Core

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

The idea behind SPDR DoubleLine Emerging and FlexShares Core 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.