Correlation Between IShares Core and FlexShares Morningstar

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

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

Diversification Opportunities for IShares Core and FlexShares Morningstar

0.99

Correlation Coefficient

IShares Core  FlexShares Morningstar

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 Core MSCI and FlexShares Morningstar Emergin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar and IShares Core 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 Core MSCI are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of IShares Core i.e., IShares Core and FlexShares Morningstar go up and down completely randomly.

Pair Corralation between IShares Core and FlexShares Morningstar

Given the investment horizon of 90 days iShares Core MSCI is expected to generate 1.01 times more return on investment than FlexShares Morningstar. However, IShares Core is 1.01 times more volatile than FlexShares Morningstar Emerging. It trades about 0.06 of its potential returns per unit of risk. FlexShares Morningstar Emerging is currently generating about 0.06 per unit of risk. If you would invest  5,231  in iShares Core MSCI on December 30, 2024 and sell it today you would earn a total of  178.00  from holding iShares Core MSCI or generate 3.4% return on investment over 90 days.

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

iShares Core MSCI  vs.  FlexShares Morningstar Emergin

iShares Core MSCI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

FlexShares Morningstar

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Morningstar Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FlexShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and FlexShares Morningstar

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

The idea behind iShares Core MSCI and FlexShares Morningstar Emerging 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.