Correlation Between FlexShares Morningstar and IShares Basic

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

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

Diversification Opportunities for FlexShares Morningstar and IShares Basic

0.77

Correlation Coefficient

FlexShares Morningstar  IShares Basic

Poor diversification

The 3 months correlation between FlexShares and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Global and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials and FlexShares Morningstar 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 Morningstar Global are associated (or correlated) with IShares Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and IShares Basic go up and down completely randomly.

Pair Corralation between FlexShares Morningstar and IShares Basic

Given the investment horizon of 90 days FlexShares Morningstar Global is expected to generate 0.78 times more return on investment than IShares Basic. However, FlexShares Morningstar Global is 1.28 times less risky than IShares Basic. It trades about 0.16 of its potential returns per unit of risk. iShares Basic Materials is currently generating about 0.07 per unit of risk. If you would invest  3,591  in FlexShares Morningstar Global on December 30, 2024 and sell it today you would earn a total of  281.00  from holding FlexShares Morningstar Global or generate 7.83% return on investment over 90 days.

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

FlexShares Morningstar Global  vs.  iShares Basic Materials

FlexShares Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Morningstar Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FlexShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Basic Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Basic Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Basic is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Morningstar and IShares Basic

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

The idea behind FlexShares Morningstar Global and iShares Basic Materials 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 CEOs Directory module to screen CEOs from public companies around the world.