Correlation Between Matthews International and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Matthews International and IShares MSCI 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 Matthews International and IShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews International Funds and iShares MSCI Emerging, you can compare the effects of market volatilities on Matthews International and IShares MSCI 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 Matthews International with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews International and IShares MSCI.
Diversification Opportunities for Matthews International and IShares MSCI
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Matthews International Funds and iShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Emerging and Matthews 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 Matthews International Funds are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Emerging has no effect on the direction of Matthews International i.e., Matthews International and IShares MSCI go up and down completely randomly.
Pair Corralation between Matthews International and IShares MSCI
Given the investment horizon of 90 days Matthews International is expected to generate 1.13 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Matthews International Funds is 1.06 times less risky than IShares MSCI. It trades about 0.14 of its potential returns per unit of risk. iShares MSCI Emerging is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,204 in iShares MSCI Emerging on November 29, 2024 and sell it today you would earn a total of 246.00 from holding iShares MSCI Emerging or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Matthews International Funds vs. iShares MSCI Emerging
Performance |
| Timeline |
| Matthews International |
| iShares MSCI Emerging |
Matthews International and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews International and IShares MSCI
The main advantage of trading using opposite Matthews International and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews International position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind Matthews International Funds and iShares MSCI Emerging 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.
| IShares MSCI vs. iShares MSCI Emerging | IShares MSCI vs. iShares MSCI Europe | IShares MSCI vs. iShares MSCI All | IShares MSCI vs. iShares Emerging Markets |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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