Correlation Between IShares Edge and FlexShares High

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

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

Diversification Opportunities for IShares Edge and FlexShares High

0.99

Correlation Coefficient

IShares Edge  FlexShares High

No risk reduction

The 3 months correlation between IShares and FlexShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares Edge High and FlexShares High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares High Yield and IShares Edge 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 Edge High are associated (or correlated) with FlexShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares High Yield has no effect on the direction of IShares Edge i.e., IShares Edge and FlexShares High go up and down completely randomly.

Pair Corralation between IShares Edge and FlexShares High

Given the investment horizon of 90 days iShares Edge High is expected to generate 0.99 times more return on investment than FlexShares High. However, iShares Edge High is 1.01 times less risky than FlexShares High. It trades about 0.11 of its potential returns per unit of risk. FlexShares High Yield is currently generating about 0.1 per unit of risk. If you would invest  3,816  in iShares Edge High on September 26, 2024 and sell it today you would earn a total of  878.00  from holding iShares Edge High or generate 23.01% return on investment over 90 days.

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

iShares Edge High  vs.  FlexShares High Yield

iShares Edge High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, IShares Edge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FlexShares High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares High Yield are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, FlexShares High is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Edge and FlexShares High

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

The idea behind iShares Edge High and FlexShares High Yield 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.