Correlation Between FlexShares STOXX and SPDR Portfolio
Can any of the company-specific risk be diversified away by investing in both FlexShares STOXX and SPDR Portfolio 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 Portfolio 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 Portfolio MSCI, you can compare the effects of market volatilities on FlexShares STOXX and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares STOXX and SPDR Portfolio.
Diversification Opportunities for FlexShares STOXX and SPDR Portfolio
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FlexShares and SPDR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and SPDR Portfolio MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio MSCI 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 Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio MSCI has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and SPDR Portfolio go up and down completely randomly.
Pair Corralation between FlexShares STOXX and SPDR Portfolio
Given the investment horizon of 90 days FlexShares STOXX Global is expected to generate 0.84 times more return on investment than SPDR Portfolio. However, FlexShares STOXX Global is 1.19 times less risky than SPDR Portfolio. It trades about 0.1 of its potential returns per unit of risk. SPDR Portfolio MSCI is currently generating about 0.0 per unit of risk. If you would invest 17,023 in FlexShares STOXX Global on December 5, 2024 and sell it today you would earn a total of 406.00 from holding FlexShares STOXX Global or generate 2.39% 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 Portfolio MSCI
Performance |
Timeline |
FlexShares STOXX Global |
SPDR Portfolio MSCI |
FlexShares STOXX and SPDR Portfolio Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FlexShares STOXX and SPDR Portfolio
The main advantage of trading using opposite FlexShares STOXX and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.FlexShares STOXX vs. FlexShares Quality Large | FlexShares STOXX vs. FlexShares Disciplined Duration | FlexShares STOXX vs. FlexShares Real Assets | FlexShares STOXX vs. First Trust Developed |
SPDR Portfolio vs. SPDR Portfolio Europe | SPDR Portfolio vs. SPDR Portfolio Corporate | SPDR Portfolio vs. SPDR Portfolio Intermediate | SPDR Portfolio vs. SPDR MSCI EAFE |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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