Correlation Between IShares China and Franklin FTSE
Can any of the company-specific risk be diversified away by investing in both IShares China and Franklin FTSE 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 Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China Large Cap and Franklin FTSE Hong, you can compare the effects of market volatilities on IShares China and Franklin FTSE 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 Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and Franklin FTSE.
Diversification Opportunities for IShares China and Franklin FTSE
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Franklin is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large Cap and Franklin FTSE Hong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Hong 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 Large Cap are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Hong has no effect on the direction of IShares China i.e., IShares China and Franklin FTSE go up and down completely randomly.
Pair Corralation between IShares China and Franklin FTSE
Considering the 90-day investment horizon iShares China Large Cap is expected to under-perform the Franklin FTSE. In addition to that, IShares China is 1.93 times more volatile than Franklin FTSE Hong. It trades about -0.17 of its total potential returns per unit of risk. Franklin FTSE Hong is currently generating about -0.28 per unit of volatility. If you would invest 1,883 in Franklin FTSE Hong on August 29, 2024 and sell it today you would lose (133.00) from holding Franklin FTSE Hong or give up 7.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China Large Cap vs. Franklin FTSE Hong
Performance |
| Timeline |
| iShares China Large |
| Franklin FTSE Hong |
IShares China and Franklin FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and Franklin FTSE
The main advantage of trading using opposite IShares China and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.| IShares China vs. iShares MSCI Brazil | IShares China vs. iShares MSCI Emerging | IShares China vs. iShares MSCI Japan | IShares China vs. iShares MSCI Hong |
| Franklin FTSE vs. Franklin FTSE China | Franklin FTSE vs. Franklin FTSE Taiwan | Franklin FTSE vs. Franklin FTSE Japan | Franklin FTSE vs. Franklin FTSE Germany |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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