Correlation Between FlexShares Global and Vanguard Real
Can any of the company-specific risk be diversified away by investing in both FlexShares Global and Vanguard Real 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 Global and Vanguard Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FlexShares Global Quality and Vanguard Real Estate, you can compare the effects of market volatilities on FlexShares Global and Vanguard Real 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 Global with a short position of Vanguard Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Global and Vanguard Real.
Diversification Opportunities for FlexShares Global and Vanguard Real
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FlexShares and Vanguard is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Global Quality and Vanguard Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Real Estate and FlexShares 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 FlexShares Global Quality are associated (or correlated) with Vanguard Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Real Estate has no effect on the direction of FlexShares Global i.e., FlexShares Global and Vanguard Real go up and down completely randomly.
Pair Corralation between FlexShares Global and Vanguard Real
Given the investment horizon of 90 days FlexShares Global Quality is expected to generate 0.86 times more return on investment than Vanguard Real. However, FlexShares Global Quality is 1.16 times less risky than Vanguard Real. It trades about 0.02 of its potential returns per unit of risk. Vanguard Real Estate is currently generating about 0.01 per unit of risk. If you would invest 5,100 in FlexShares Global Quality on January 20, 2024 and sell it today you would earn a total of 160.00 from holding FlexShares Global Quality or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FlexShares Global Quality vs. Vanguard Real Estate
Performance |
| Timeline |
| FlexShares Global Quality |
| Vanguard Real Estate |
FlexShares Global and Vanguard Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FlexShares Global and Vanguard Real
The main advantage of trading using opposite FlexShares Global and Vanguard Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares Global position performs unexpectedly, Vanguard Real 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 Vanguard Real will offset losses from the drop in Vanguard Real's long position.| FlexShares Global vs. Vanguard FTSE All World | FlexShares Global vs. Vanguard Real Estate | FlexShares Global vs. Vanguard Total International | FlexShares Global vs. Schwab REIT ETF |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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