Correlation Between IShares MSCI and Matthews International

Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI Pacific and Matthews International Funds, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Matthews International. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Matthews International.

Diversification Opportunities for IShares MSCI and Matthews International

0.84

Correlation Coefficient

IShares MSCI  Matthews International

Very poor diversification

The 3 months correlation between IShares and Matthews is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Pacific 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 MSCI 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 MSCI Pacific 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 MSCI i.e., IShares MSCI and Matthews International go up and down completely randomly.

Pair Corralation between IShares MSCI and Matthews International

Considering the 90-day investment horizon iShares MSCI Pacific is expected to generate 0.72 times more return on investment than Matthews International. However, iShares MSCI Pacific is 1.38 times less risky than Matthews International. It trades about 0.09 of its potential returns per unit of risk. Matthews International Funds is currently generating about 0.06 per unit of risk. If you would invest  4,498  in iShares MSCI Pacific on September 1, 2024 and sell it today you would earn a total of  263.00  from holding iShares MSCI Pacific or generate 5.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

iShares MSCI Pacific  vs.  Matthews International Funds

iShares MSCI Pacific

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Pacific are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Matthews International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews International Funds are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Matthews International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Matthews International

The main advantage of trading using opposite IShares MSCI and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI Pacific 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.