Correlation Between IShares MSCI and IShares China

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Can any of the company-specific risk be diversified away by investing in both IShares MSCI and IShares China 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 MSCI and IShares China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI Brazil and iShares China Large Cap, you can compare the effects of market volatilities on IShares MSCI and IShares China 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 MSCI with a short position of IShares China. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and IShares China.

Diversification Opportunities for IShares MSCI and IShares China

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between IShares and IShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Brazil and iShares China Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China Large and IShares MSCI 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 MSCI Brazil are associated (or correlated) with IShares China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China Large has no effect on the direction of IShares MSCI i.e., IShares MSCI and IShares China go up and down completely randomly.

Pair Corralation between IShares MSCI and IShares China

Considering the 90-day investment horizon iShares MSCI Brazil is expected to generate 0.55 times more return on investment than IShares China. However, iShares MSCI Brazil is 1.82 times less risky than IShares China. It trades about -0.13 of its potential returns per unit of risk. iShares China Large Cap is currently generating about -0.16 per unit of risk. If you would invest  2,854  in iShares MSCI Brazil on August 27, 2024 and sell it today you would lose (103.00) from holding iShares MSCI Brazil or give up 3.61% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

iShares MSCI Brazil  vs.  iShares China Large Cap

 Performance 
       Timeline  
iShares MSCI Brazil 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days iShares MSCI Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.
iShares China Large 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, IShares China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

IShares MSCI and IShares China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and IShares China

The main advantage of trading using opposite IShares MSCI and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, IShares China 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 China will offset losses from the drop in IShares China's long position.
The idea behind iShares MSCI Brazil and iShares China Large Cap 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.
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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