Correlation Between IShares China and IShares Dow
Can any of the company-specific risk be diversified away by investing in both IShares China and IShares Dow 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 IShares China and IShares Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China CNY and iShares Dow Jones, you can compare the effects of market volatilities on IShares China and IShares Dow 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 IShares China with a short position of IShares Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and IShares Dow.
Diversification Opportunities for IShares China and IShares Dow
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and IShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and iShares Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dow Jones and IShares China 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 iShares China CNY are associated (or correlated) with IShares Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dow Jones has no effect on the direction of IShares China i.e., IShares China and IShares Dow go up and down completely randomly.
Pair Corralation between IShares China and IShares Dow
Assuming the 90 days trading horizon IShares China is expected to generate 5.08 times less return on investment than IShares Dow. But when comparing it to its historical volatility, iShares China CNY is 2.16 times less risky than IShares Dow. It trades about 0.04 of its potential returns per unit of risk. iShares Dow Jones is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,069 in iShares Dow Jones on August 29, 2024 and sell it today you would earn a total of 2,044 from holding iShares Dow Jones or generate 40.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China CNY vs. iShares Dow Jones
Performance |
| Timeline |
| iShares China CNY |
| iShares Dow Jones |
IShares China and IShares Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and IShares Dow
The main advantage of trading using opposite IShares China and IShares Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, IShares Dow 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 Dow will offset losses from the drop in IShares Dow's long position.| IShares China vs. iShares China CNY | IShares China vs. iShares Core FTSE | IShares China vs. iShares MSCI EM | IShares China vs. iShares MSCI China |
| IShares Dow vs. iShares III Public | IShares Dow vs. iShares Core MSCI | IShares Dow vs. iShares France Govt | IShares Dow vs. iShares Edge MSCI |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |