Correlation Between FlexShares International and IQ 50

Can any of the company-specific risk be diversified away by investing in both FlexShares International and IQ 50 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 International and IQ 50 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FlexShares International Quality and IQ 50 Percent, you can compare the effects of market volatilities on FlexShares International and IQ 50 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 International with a short position of IQ 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares International and IQ 50.

Diversification Opportunities for FlexShares International and IQ 50

0.91

Correlation Coefficient

FlexShares International  IQ 50

Almost no diversification

The 3 months correlation between FlexShares and HFXI is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares International Quali and IQ 50 Percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ 50 Percent and FlexShares International 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 International Quality are associated (or correlated) with IQ 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ 50 Percent has no effect on the direction of FlexShares International i.e., FlexShares International and IQ 50 go up and down completely randomly.

Pair Corralation between FlexShares International and IQ 50

Given the investment horizon of 90 days FlexShares International Quality is expected to generate 1.03 times more return on investment than IQ 50. However, FlexShares International is 1.03 times more volatile than IQ 50 Percent. It trades about 0.67 of its potential returns per unit of risk. IQ 50 Percent is currently generating about 0.42 per unit of risk. If you would invest  2,368  in FlexShares International Quality on February 21, 2024 and sell it today you would earn a total of  198.00  from holding FlexShares International Quality or generate 8.36% return on investment over 90 days.

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

FlexShares International Quali  vs.  IQ 50 Percent

FlexShares International

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares International Quality are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, FlexShares International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

IQ 50 Percent

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IQ 50 Percent are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, IQ 50 may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with FlexShares International and IQ 50

The main advantage of trading using opposite FlexShares International and IQ 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares International position performs unexpectedly, IQ 50 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 IQ 50 will offset losses from the drop in IQ 50's long position.

The idea behind FlexShares International Quality and IQ 50 Percent 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.