Correlation Between IShares Global and FlexShares Global

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

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

Diversification Opportunities for IShares Global and FlexShares Global

0.97

Correlation Coefficient

IShares Global  FlexShares Global

Almost no diversification

The 3 months correlation between IShares and FlexShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global REIT and FlexShares Global Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Global Quality 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 REIT are associated (or correlated) with FlexShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Global Quality has no effect on the direction of IShares Global i.e., IShares Global and FlexShares Global go up and down completely randomly.

Pair Corralation between IShares Global and FlexShares Global

Given the investment horizon of 90 days iShares Global REIT is expected to generate 1.07 times more return on investment than FlexShares Global. However, IShares Global is 1.07 times more volatile than FlexShares Global Quality. It trades about 0.04 of its potential returns per unit of risk. FlexShares Global Quality is currently generating about 0.03 per unit of risk. If you would invest  2,381  in iShares Global REIT on December 27, 2024 and sell it today you would earn a total of  43.00  from holding iShares Global REIT or generate 1.81% return on investment over 90 days.

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

iShares Global REIT  vs.  FlexShares Global Quality

iShares Global REIT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, IShares Global is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

FlexShares Global Quality

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Global Quality are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FlexShares Global is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Global and FlexShares Global

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

The idea behind iShares Global REIT and FlexShares Global Quality 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.