Correlation Between Wahed FTSE and FlexShares Morningstar
Can any of the company-specific risk be diversified away by investing in both Wahed FTSE and FlexShares Morningstar 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 Wahed FTSE and FlexShares Morningstar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wahed FTSE USA and FlexShares Morningstar Market, you can compare the effects of market volatilities on Wahed FTSE and FlexShares Morningstar 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 Wahed FTSE with a short position of FlexShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wahed FTSE and FlexShares Morningstar.
Diversification Opportunities for Wahed FTSE and FlexShares Morningstar
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wahed and FlexShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Wahed FTSE USA and FlexShares Morningstar Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar and Wahed 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 Wahed FTSE USA are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of Wahed FTSE i.e., Wahed FTSE and FlexShares Morningstar go up and down completely randomly.
Pair Corralation between Wahed FTSE and FlexShares Morningstar
Given the investment horizon of 90 days Wahed FTSE USA is expected to generate 0.94 times more return on investment than FlexShares Morningstar. However, Wahed FTSE USA is 1.07 times less risky than FlexShares Morningstar. It trades about -0.28 of its potential returns per unit of risk. FlexShares Morningstar Market is currently generating about -0.28 per unit of risk. If you would invest 4,838 in Wahed FTSE USA on January 20, 2024 and sell it today you would lose (201.00) from holding Wahed FTSE USA or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wahed FTSE USA vs. FlexShares Morningstar Market
Performance |
| Timeline |
| Wahed FTSE USA |
| FlexShares Morningstar |
Wahed FTSE and FlexShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wahed FTSE and FlexShares Morningstar
The main advantage of trading using opposite Wahed FTSE and FlexShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wahed FTSE position performs unexpectedly, FlexShares Morningstar 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 Morningstar will offset losses from the drop in FlexShares Morningstar's long position.| Wahed FTSE vs. Dimensional Targeted Value | Wahed FTSE vs. Dimensional World ex | Wahed FTSE vs. Dimensional Small Cap |
| FlexShares Morningstar vs. Dimensional Targeted Value | FlexShares Morningstar vs. Dimensional World ex | FlexShares Morningstar vs. Dimensional Small Cap |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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