Correlation Between FlexShares Credit and Vident Core

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

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

Diversification Opportunities for FlexShares Credit and Vident Core

0.95

Correlation Coefficient

FlexShares Credit  Vident Core

Almost no diversification

The 3 months correlation between FlexShares and Vident is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Credit Scored Corpo and Vident Core Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vident Core Bond and FlexShares Credit 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 Credit Scored Corporate are associated (or correlated) with Vident Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vident Core Bond has no effect on the direction of FlexShares Credit i.e., FlexShares Credit and Vident Core go up and down completely randomly.

Pair Corralation between FlexShares Credit and Vident Core

Given the investment horizon of 90 days FlexShares Credit is expected to generate 1.19 times less return on investment than Vident Core. But when comparing it to its historical volatility, FlexShares Credit Scored Corporate is 1.86 times less risky than Vident Core. It trades about 0.18 of its potential returns per unit of risk. Vident Core Bond is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,259  in Vident Core Bond on December 29, 2024 and sell it today you would earn a total of  102.00  from holding Vident Core Bond or generate 2.39% return on investment over 90 days.

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

FlexShares Credit Scored Corpo  vs.  Vident Core Bond

FlexShares Credit

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Credit Scored Corporate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, FlexShares Credit is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vident Core Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vident Core Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vident Core is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FlexShares Credit and Vident Core

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

The idea behind FlexShares Credit Scored Corporate and Vident Core Bond 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .