Correlation Between IShares SP and IShares China
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and iShares China CNY, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of IShares China. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and IShares China.
Diversification Opportunities for IShares SP and IShares China
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and IShares is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and iShares China CNY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China CNY and IShares SP 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 SP 500 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 CNY has no effect on the direction of IShares SP i.e., IShares SP and IShares China go up and down completely randomly.
Pair Corralation between IShares SP and IShares China
Assuming the 90 days trading horizon iShares SP 500 is expected to generate 2.52 times more return on investment than IShares China. However, IShares SP is 2.52 times more volatile than iShares China CNY. It trades about 0.17 of its potential returns per unit of risk. iShares China CNY is currently generating about 0.06 per unit of risk. If you would invest 4,151 in iShares SP 500 on August 27, 2024 and sell it today you would earn a total of 1,565 from holding iShares SP 500 or generate 37.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. iShares China CNY
Performance |
| Timeline |
| iShares SP 500 |
| iShares China CNY |
IShares SP and IShares China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and IShares China
The main advantage of trading using opposite IShares SP and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. Vanguard SP 500 | IShares SP vs. SPDR Dow Jones | IShares SP vs. iShares China CNY | IShares SP vs. iShares Core MSCI |
| IShares China vs. Vanguard SP 500 | IShares China vs. SPDR Dow Jones | IShares China vs. iShares SP 500 | IShares China vs. iShares China CNY |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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