Correlation Between FlexShares STOXX and Invesco SP

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

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

Diversification Opportunities for FlexShares STOXX and Invesco SP

0.47

Correlation Coefficient

FlexShares STOXX  Invesco SP

Very weak diversification

The 3 months correlation between FlexShares and Invesco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and Invesco SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Emerging and FlexShares STOXX 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 STOXX Global are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP Emerging has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and Invesco SP go up and down completely randomly.

Pair Corralation between FlexShares STOXX and Invesco SP

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.89 times more return on investment than Invesco SP. However, FlexShares STOXX Global is 1.12 times less risky than Invesco SP. It trades about -0.01 of its potential returns per unit of risk. Invesco SP Emerging is currently generating about -0.1 per unit of risk. If you would invest  17,142  in FlexShares STOXX Global on October 9, 2024 and sell it today you would lose (119.00) from holding FlexShares STOXX Global or give up 0.69% of portfolio value over 90 days.

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

FlexShares STOXX Global  vs.  Invesco SP Emerging

FlexShares STOXX Global

Risk-Adjusted Performance

0 of 100

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.

Invesco SP Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares STOXX and Invesco SP

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

The idea behind FlexShares STOXX Global and Invesco SP Emerging 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.