Correlation Between Vanguard FTSE and FlexShares Global

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

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

Diversification Opportunities for Vanguard FTSE and FlexShares Global

0.82

Correlation Coefficient

Vanguard FTSE  FlexShares Global

Very poor diversification

The 3 months correlation between Vanguard and FlexShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed 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 Vanguard FTSE 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 Vanguard FTSE Developed 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 Vanguard FTSE i.e., Vanguard FTSE and FlexShares Global go up and down completely randomly.

Pair Corralation between Vanguard FTSE and FlexShares Global

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to generate 0.81 times more return on investment than FlexShares Global. However, Vanguard FTSE Developed is 1.24 times less risky than FlexShares Global. It trades about -0.07 of its potential returns per unit of risk. FlexShares Global Quality is currently generating about -0.09 per unit of risk. If you would invest  5,023  in Vanguard FTSE Developed on October 22, 2024 and sell it today you would lose (166.00) from holding Vanguard FTSE Developed or give up 3.3% of portfolio value over 90 days.

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

Vanguard FTSE Developed  vs.  FlexShares Global Quality

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FlexShares Global Quality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Global Quality has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Vanguard FTSE and FlexShares Global

The main advantage of trading using opposite Vanguard FTSE and FlexShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 Vanguard FTSE Developed 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.