Correlation Between IShares China and VanEck AEX
Can any of the company-specific risk be diversified away by investing in both IShares China and VanEck AEX 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 VanEck AEX 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 VanEck AEX UCITS, you can compare the effects of market volatilities on IShares China and VanEck AEX 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 VanEck AEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and VanEck AEX.
Diversification Opportunities for IShares China and VanEck AEX
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and VanEck is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and VanEck AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck AEX UCITS 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 VanEck AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck AEX UCITS has no effect on the direction of IShares China i.e., IShares China and VanEck AEX go up and down completely randomly.
Pair Corralation between IShares China and VanEck AEX
Assuming the 90 days trading horizon iShares China CNY is expected to under-perform the VanEck AEX. But the etf apears to be less risky and, when comparing its historical volatility, iShares China CNY is 2.17 times less risky than VanEck AEX. The etf trades about -0.08 of its potential returns per unit of risk. The VanEck AEX UCITS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,762 in VanEck AEX UCITS on September 1, 2024 and sell it today you would earn a total of 127.00 from holding VanEck AEX UCITS or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares China CNY vs. VanEck AEX UCITS
Performance |
| Timeline |
| iShares China CNY |
| VanEck AEX UCITS |
IShares China and VanEck AEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and VanEck AEX
The main advantage of trading using opposite IShares China and VanEck AEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, VanEck AEX 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 VanEck AEX will offset losses from the drop in VanEck AEX's long position.| IShares China vs. iShares Core MSCI | IShares China vs. BlackRock ESG Multi Asset | IShares China vs. Pershing Square Holdings | IShares China vs. ASML Holding NV |
| VanEck AEX vs. VanEck Global Real | VanEck AEX vs. VanEck Sustainable World | VanEck AEX vs. VanEck Morningstar Developed | VanEck AEX vs. Vanguard SP 500 |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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