Correlation Between FlexShares International and FlexShares Morningstar

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

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

Diversification Opportunities for FlexShares International and FlexShares Morningstar

0.79

Correlation Coefficient

FlexShares International  FlexShares Morningstar

Poor diversification

The 3 months correlation between FlexShares and FlexShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares International Quali and FlexShares Morningstar Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar and FlexShares International 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 International Quality 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 FlexShares International i.e., FlexShares International and FlexShares Morningstar go up and down completely randomly.

Pair Corralation between FlexShares International and FlexShares Morningstar

Given the investment horizon of 90 days FlexShares International is expected to generate 1.12 times less return on investment than FlexShares Morningstar. But when comparing it to its historical volatility, FlexShares International Quality is 1.05 times less risky than FlexShares Morningstar. It trades about 0.16 of its potential returns per unit of risk. FlexShares Morningstar Developed is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,873  in FlexShares Morningstar Developed on December 29, 2024 and sell it today you would earn a total of  643.00  from holding FlexShares Morningstar Developed or generate 9.36% return on investment over 90 days.

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

FlexShares International Quali  vs.  FlexShares Morningstar Develop

FlexShares International

Risk-Adjusted Performance

Good

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

FlexShares Morningstar

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Morningstar Developed are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, FlexShares Morningstar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FlexShares International and FlexShares Morningstar

The main advantage of trading using opposite FlexShares International and FlexShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares International 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 FlexShares International Quality and FlexShares Morningstar Developed 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 CEOs Directory module to screen CEOs from public companies around the world.