Correlation Between IShares China and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares China and IShares Global 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 Global 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 Global Infrastructure, you can compare the effects of market volatilities on IShares China and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and IShares Global.
Diversification Opportunities for IShares China and IShares Global
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of IShares China i.e., IShares China and IShares Global go up and down completely randomly.
Pair Corralation between IShares China and IShares Global
Assuming the 90 days trading horizon IShares China is expected to generate 1.63 times less return on investment than IShares Global. But when comparing it to its historical volatility, iShares China CNY is 3.86 times less risky than IShares Global. It trades about 0.2 of its potential returns per unit of risk. iShares Global Infrastructure is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,682 in iShares Global Infrastructure on August 31, 2024 and sell it today you would earn a total of 600.00 from holding iShares Global Infrastructure or generate 22.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China CNY vs. iShares Global Infrastructure
Performance |
| Timeline |
| iShares China CNY |
| iShares Global Infra |
IShares China and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and IShares Global
The main advantage of trading using opposite IShares China and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global'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 |
| IShares Global vs. iShares Core MSCI | IShares Global vs. BlackRock ESG Multi Asset | IShares Global vs. Pershing Square Holdings | IShares Global vs. ASML Holding NV |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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