Correlation Between FlexShares High and IShares IBoxx

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

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

Diversification Opportunities for FlexShares High and IShares IBoxx

0.98

Correlation Coefficient

FlexShares High  IShares IBoxx

Almost no diversification

The 3 months correlation between FlexShares and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares High Yield and iShares iBoxx High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBoxx High and FlexShares High 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 High Yield are associated (or correlated) with IShares IBoxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBoxx High has no effect on the direction of FlexShares High i.e., FlexShares High and IShares IBoxx go up and down completely randomly.

Pair Corralation between FlexShares High and IShares IBoxx

Given the investment horizon of 90 days FlexShares High Yield is expected to under-perform the IShares IBoxx. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares High Yield is 1.02 times less risky than IShares IBoxx. The etf trades about -0.05 of its potential returns per unit of risk. The iShares iBoxx High is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  7,887  in iShares iBoxx High on September 27, 2024 and sell it today you would lose (25.00) from holding iShares iBoxx High or give up 0.32% of portfolio value over 90 days.

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

FlexShares High Yield  vs.  iShares iBoxx High

FlexShares High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares High Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, FlexShares High is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares iBoxx High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBoxx High has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FlexShares High and IShares IBoxx

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

The idea behind FlexShares High Yield and iShares iBoxx High 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.