Correlation Between IShares China and SPDR SP

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

By analyzing existing cross correlation between iShares China CNY and SPDR SP Dividend, you can compare the effects of market volatilities on IShares China and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and SPDR SP.

Diversification Opportunities for IShares China and SPDR SP

0.25

Correlation Coefficient

IShares China  SPDR SP

Modest diversification

The 3 months correlation between IShares and SPDR is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 CNY are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of IShares China i.e., IShares China and SPDR SP go up and down completely randomly.

Pair Corralation between IShares China and SPDR SP

Assuming the 90 days trading horizon iShares China CNY is expected to generate 0.3 times more return on investment than SPDR SP. However, iShares China CNY is 3.34 times less risky than SPDR SP. It trades about -0.02 of its potential returns per unit of risk. SPDR SP Dividend is currently generating about -0.04 per unit of risk. If you would invest  528.00  in iShares China CNY on December 21, 2024 and sell it today you would lose (2.00) from holding iShares China CNY or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares China CNY  vs.  SPDR SP Dividend

iShares China CNY

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares China CNY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares China is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR SP Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SPDR SP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares China and SPDR SP

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

The idea behind iShares China CNY and SPDR SP Dividend 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.