Correlation Between FlexShares STOXX and SPDR Bloomberg

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

Diversification Opportunities for FlexShares STOXX and SPDR Bloomberg

0.8

Correlation Coefficient

FlexShares STOXX  SPDR Bloomberg

Very poor diversification

The 3 months correlation between FlexShares and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and SPDR Bloomberg Barclays in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Bloomberg Barclays 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 Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Bloomberg Barclays has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and SPDR Bloomberg go up and down completely randomly.

Pair Corralation between FlexShares STOXX and SPDR Bloomberg

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 1.64 times more return on investment than SPDR Bloomberg. However, FlexShares STOXX is 1.64 times more volatile than SPDR Bloomberg Barclays. It trades about 0.08 of its potential returns per unit of risk. SPDR Bloomberg Barclays is currently generating about 0.04 per unit of risk. If you would invest  17,207  in FlexShares STOXX Global on November 28, 2024 and sell it today you would earn a total of  505.00  from holding FlexShares STOXX Global or generate 2.93% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  SPDR Bloomberg Barclays

FlexShares STOXX Global

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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 Bloomberg Barclays

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Bloomberg Barclays are ranked lower than 3 (%) 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.

Pair Trading with FlexShares STOXX and SPDR Bloomberg

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

The idea behind FlexShares STOXX Global and SPDR Bloomberg Barclays 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 Anywhere module to track or share privately all of your investments from the convenience of any device.