Correlation Between IShares China and Australian High
Can any of the company-specific risk be diversified away by investing in both IShares China and Australian High 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 Australian High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China LargeCap and Australian High Interest, you can compare the effects of market volatilities on IShares China and Australian High 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 Australian High. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and Australian High.
Diversification Opportunities for IShares China and Australian High
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Australian is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares China LargeCap and Australian High Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian High Interest 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 LargeCap are associated (or correlated) with Australian High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian High Interest has no effect on the direction of IShares China i.e., IShares China and Australian High go up and down completely randomly.
Pair Corralation between IShares China and Australian High
Assuming the 90 days trading horizon iShares China LargeCap is expected to generate 83.2 times more return on investment than Australian High. However, IShares China is 83.2 times more volatile than Australian High Interest. It trades about 0.05 of its potential returns per unit of risk. Australian High Interest is currently generating about 0.91 per unit of risk. If you would invest 4,068 in iShares China LargeCap on November 27, 2024 and sell it today you would earn a total of 1,537 from holding iShares China LargeCap or generate 37.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
iShares China LargeCap vs. Australian High Interest
Performance |
| Timeline |
| iShares China LargeCap |
| Australian High Interest |
IShares China and Australian High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and Australian High
The main advantage of trading using opposite IShares China and Australian High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China position performs unexpectedly, Australian High 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 Australian High will offset losses from the drop in Australian High's long position.| IShares China vs. iShares MSCI Emerging | IShares China vs. iShares Global Aggregate | IShares China vs. iShares CoreSP MidCap | IShares China vs. iShares 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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