Correlation Between IShares China and UBSFund Solutions

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

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

Diversification Opportunities for IShares China and UBSFund Solutions

0.67

Correlation Coefficient

IShares China  UBSFund Solutions

Poor diversification

The 3 months correlation between IShares and UBSFund is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large and UBSFund Solutions MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBSFund Solutions MSCI 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 Large are associated (or correlated) with UBSFund Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBSFund Solutions MSCI has no effect on the direction of IShares China i.e., IShares China and UBSFund Solutions go up and down completely randomly.

Pair Corralation between IShares China and UBSFund Solutions

Assuming the 90 days trading horizon iShares China Large is expected to generate 2.1 times more return on investment than UBSFund Solutions. However, IShares China is 2.1 times more volatile than UBSFund Solutions MSCI. It trades about 0.17 of its potential returns per unit of risk. UBSFund Solutions MSCI is currently generating about 0.0 per unit of risk. If you would invest  8,516  in iShares China Large on December 2, 2024 and sell it today you would earn a total of  1,572  from holding iShares China Large or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.92%
Values	Daily Returns

iShares China Large  vs.  UBSFund Solutions MSCI

iShares China Large

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares China showed solid returns over the last few months and may actually be approaching a breakup point.

UBSFund Solutions MSCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBSFund Solutions MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UBSFund Solutions 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 China and UBSFund Solutions

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

The idea behind iShares China Large and UBSFund Solutions MSCI 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.