Correlation Between IShares Intermediate and FlexShares Credit

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

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

Diversification Opportunities for IShares Intermediate and FlexShares Credit

0.88

Correlation Coefficient

IShares Intermediate  FlexShares Credit

Very poor diversification

The 3 months correlation between IShares and FlexShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Intermediate Governmen and FlexShares Credit Scored Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Credit and IShares Intermediate 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 iShares Intermediate GovernmentCredit are associated (or correlated) with FlexShares Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Credit has no effect on the direction of IShares Intermediate i.e., IShares Intermediate and FlexShares Credit go up and down completely randomly.

Pair Corralation between IShares Intermediate and FlexShares Credit

Considering the 90-day investment horizon IShares Intermediate is expected to generate 1.4 times less return on investment than FlexShares Credit. But when comparing it to its historical volatility, iShares Intermediate GovernmentCredit is 3.21 times less risky than FlexShares Credit. It trades about 0.09 of its potential returns per unit of risk. FlexShares Credit Scored Long is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,854  in FlexShares Credit Scored Long on October 4, 2024 and sell it today you would earn a total of  341.00  from holding FlexShares Credit Scored Long or generate 8.85% return on investment over 90 days.

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

iShares Intermediate Governmen  vs.  FlexShares Credit Scored Long

iShares Intermediate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Intermediate GovernmentCredit has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares Intermediate is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

FlexShares Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Credit Scored Long has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, FlexShares Credit is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with IShares Intermediate and FlexShares Credit

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

The idea behind iShares Intermediate GovernmentCredit and FlexShares Credit Scored Long 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.