Correlation Between FlexShares STOXX and Vanguard ESG

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

Diversification Opportunities for FlexShares STOXX and Vanguard ESG

0.5

Correlation Coefficient

FlexShares STOXX  Vanguard ESG

Very weak diversification

The 3 months correlation between FlexShares and Vanguard is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and Vanguard ESG Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard ESG Stock 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 Vanguard ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard ESG Stock has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and Vanguard ESG go up and down completely randomly.

Pair Corralation between FlexShares STOXX and Vanguard ESG

Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.76 times more return on investment than Vanguard ESG. However, FlexShares STOXX Global is 1.32 times less risky than Vanguard ESG. It trades about 0.03 of its potential returns per unit of risk. Vanguard ESG Stock is currently generating about -0.1 per unit of risk. If you would invest  16,976  in FlexShares STOXX Global on December 21, 2024 and sell it today you would earn a total of  232.00  from holding FlexShares STOXX Global or generate 1.37% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  Vanguard ESG Stock

FlexShares STOXX Global

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vanguard ESG Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard ESG Stock has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with FlexShares STOXX and Vanguard ESG

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

The idea behind FlexShares STOXX Global and Vanguard ESG Stock 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.