Correlation Between FlexShares STOXX and SPDR MSCI

Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and SPDR MSCI 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 SPDR MSCI 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 SPDR MSCI Emerging, you can compare the effects of market volatilities on FlexShares STOXX and SPDR MSCI 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 SPDR MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and SPDR MSCI.

Diversification Opportunities for FlexShares STOXX and SPDR MSCI

0.12

Correlation Coefficient

FlexShares STOXX  SPDR MSCI

Average diversification

The 3 months correlation between FlexShares and SPDR is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and SPDR MSCI go up and down completely randomly.

Pair Corralation between FlexShares STOXX and SPDR MSCI

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.73 times more return on investment than SPDR MSCI. However, FlexShares STOXX Global is 1.38 times less risky than SPDR MSCI. It trades about 0.09 of its potential returns per unit of risk. SPDR MSCI Emerging is currently generating about 0.06 per unit of risk. If you would invest  14,602  in FlexShares STOXX Global on October 9, 2024 and sell it today you would earn a total of  2,421  from holding FlexShares STOXX Global or generate 16.58% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  SPDR MSCI 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.

SPDR MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with FlexShares STOXX and SPDR MSCI

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

The idea behind FlexShares STOXX Global and SPDR MSCI 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.