Correlation Between IShares Asia and Matthews International

Can any of the company-specific risk be diversified away by investing in both IShares Asia and Matthews International 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 Asia and Matthews International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Asia 50 and Matthews International Funds, you can compare the effects of market volatilities on IShares Asia and Matthews International 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 Asia with a short position of Matthews International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Asia and Matthews International.

Diversification Opportunities for IShares Asia and Matthews International

0.69

Correlation Coefficient

IShares Asia  Matthews International

Poor diversification

The 3 months correlation between IShares and Matthews is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia 50 and Matthews International Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International and IShares Asia 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 Asia 50 are associated (or correlated) with Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of IShares Asia i.e., IShares Asia and Matthews International go up and down completely randomly.

Pair Corralation between IShares Asia and Matthews International

Considering the 90-day investment horizon iShares Asia 50 is expected to generate 1.14 times more return on investment than Matthews International. However, IShares Asia is 1.14 times more volatile than Matthews International Funds. It trades about 0.11 of its potential returns per unit of risk. Matthews International Funds is currently generating about 0.0 per unit of risk. If you would invest  6,821  in iShares Asia 50 on December 29, 2024 and sell it today you would earn a total of  641.00  from holding iShares Asia 50 or generate 9.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

iShares Asia 50  vs.  Matthews International Funds

iShares Asia 50

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Asia 50 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile forward indicators, IShares Asia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Matthews International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews International Funds has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Matthews International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Asia and Matthews International

The main advantage of trading using opposite IShares Asia and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Asia position performs unexpectedly, Matthews International 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 Matthews International will offset losses from the drop in Matthews International's long position.

The idea behind iShares Asia 50 and Matthews International Funds 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.