Correlation Between Themes Transatlantic and FlexShares STOXX

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

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

Diversification Opportunities for Themes Transatlantic and FlexShares STOXX

0.52

Correlation Coefficient

Themes Transatlantic  FlexShares STOXX

Very weak diversification

The 3 months correlation between Themes and FlexShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Themes Transatlantic Defense 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 Themes Transatlantic 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 Themes Transatlantic Defense 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 Themes Transatlantic i.e., Themes Transatlantic and FlexShares STOXX go up and down completely randomly.

Pair Corralation between Themes Transatlantic and FlexShares STOXX

Given the investment horizon of 90 days Themes Transatlantic Defense is expected to generate 1.9 times more return on investment than FlexShares STOXX. However, Themes Transatlantic is 1.9 times more volatile than FlexShares STOXX Global. It trades about 0.19 of its potential returns per unit of risk. FlexShares STOXX Global is currently generating about 0.16 per unit of risk. If you would invest  2,552  in Themes Transatlantic Defense on December 29, 2024 and sell it today you would earn a total of  378.00  from holding Themes Transatlantic Defense or generate 14.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Themes Transatlantic Defense  vs.  FlexShares STOXX Global

Themes Transatlantic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Transatlantic Defense are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Themes Transatlantic displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Themes Transatlantic and FlexShares STOXX

The main advantage of trading using opposite Themes Transatlantic and FlexShares STOXX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Transatlantic 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 Themes Transatlantic Defense 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.