Correlation Between RiverFront Strategic and FlexShares Core

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

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

Diversification Opportunities for RiverFront Strategic and FlexShares Core

0.81

Correlation Coefficient

RiverFront Strategic  FlexShares Core

Very poor diversification

The 3 months correlation between RiverFront and FlexShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding RiverFront Strategic Income and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and RiverFront Strategic 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 RiverFront Strategic Income are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of RiverFront Strategic i.e., RiverFront Strategic and FlexShares Core go up and down completely randomly.

Pair Corralation between RiverFront Strategic and FlexShares Core

Given the investment horizon of 90 days RiverFront Strategic Income is expected to generate 2.38 times more return on investment than FlexShares Core. However, RiverFront Strategic is 2.38 times more volatile than FlexShares Core Select. It trades about -0.15 of its potential returns per unit of risk. FlexShares Core Select is currently generating about -0.4 per unit of risk. If you would invest  2,312  in RiverFront Strategic Income on October 1, 2024 and sell it today you would lose (43.00) from holding RiverFront Strategic Income or give up 1.86% of portfolio value over 90 days.

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

RiverFront Strategic Income  vs.  FlexShares Core Select

RiverFront Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RiverFront Strategic Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, RiverFront Strategic is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

FlexShares Core Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Core Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, FlexShares Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RiverFront Strategic and FlexShares Core

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

The idea behind RiverFront Strategic Income and FlexShares Core Select 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.