Correlation Between IShares Global and FlexShares STOXX

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

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

Diversification Opportunities for IShares Global and FlexShares STOXX

0.65

Correlation Coefficient

IShares Global  FlexShares STOXX

Poor diversification

The 3 months correlation between IShares and FlexShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Infrastructure and FlexShares STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares STOXX Global and IShares Global 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 Global Infrastructure are associated (or correlated) with FlexShares STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares STOXX Global has no effect on the direction of IShares Global i.e., IShares Global and FlexShares STOXX go up and down completely randomly.

Pair Corralation between IShares Global and FlexShares STOXX

Considering the 90-day investment horizon IShares Global is expected to generate 1.51 times less return on investment than FlexShares STOXX. In addition to that, IShares Global is 1.21 times more volatile than FlexShares STOXX Global. It trades about 0.08 of its total potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.15 per unit of volatility. If you would invest  5,399  in FlexShares STOXX Global on December 30, 2024 and sell it today you would earn a total of  347.00  from holding FlexShares STOXX Global or generate 6.43% return on investment over 90 days.

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

iShares Global Infrastructure  vs.  FlexShares STOXX Global

iShares Global Infra

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Infrastructure are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

FlexShares STOXX Global

Risk-Adjusted Performance

Good

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

Pair Trading with IShares Global and FlexShares STOXX

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

The idea behind iShares Global Infrastructure and FlexShares STOXX Global 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.