Correlation Between IShares MSCI and Matthews China

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

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

Diversification Opportunities for IShares MSCI and Matthews China

0.97

Correlation Coefficient

IShares MSCI  Matthews China

Almost no diversification

The 3 months correlation between IShares and Matthews is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and Matthews China Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Active 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 Hong are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Active has no effect on the direction of IShares MSCI i.e., IShares MSCI and Matthews China go up and down completely randomly.

Pair Corralation between IShares MSCI and Matthews China

Considering the 90-day investment horizon iShares MSCI Hong is expected to under-perform the Matthews China. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Hong is 1.32 times less risky than Matthews China. The etf trades about -0.03 of its potential returns per unit of risk. The Matthews China Active is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,184  in Matthews China Active on October 25, 2024 and sell it today you would earn a total of  6.00  from holding Matthews China Active or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.44%
Values	Daily Returns

iShares MSCI Hong  vs.  Matthews China Active

iShares MSCI Hong

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Hong has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Matthews China Active

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews China Active has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with IShares MSCI and Matthews China

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

The idea behind iShares MSCI Hong and Matthews China Active 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.