Correlation Between IShares China and Xtrackers Harvest

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

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

Diversification Opportunities for IShares China and Xtrackers Harvest

0.85

Correlation Coefficient

IShares China  Xtrackers Harvest

Very poor diversification

The 3 months correlation between IShares and Xtrackers is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large Cap and Xtrackers Harvest CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Harvest CSI 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 Cap are associated (or correlated) with Xtrackers Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Harvest CSI has no effect on the direction of IShares China i.e., IShares China and Xtrackers Harvest go up and down completely randomly.

Pair Corralation between IShares China and Xtrackers Harvest

Considering the 90-day investment horizon iShares China Large Cap is expected to generate 1.02 times more return on investment than Xtrackers Harvest. However, IShares China is 1.02 times more volatile than Xtrackers Harvest CSI. It trades about 0.01 of its potential returns per unit of risk. Xtrackers Harvest CSI is currently generating about 0.0 per unit of risk. If you would invest  3,072  in iShares China Large Cap on September 19, 2024 and sell it today you would lose (5.00) from holding iShares China Large Cap or give up 0.16% of portfolio value over 90 days.

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

iShares China Large Cap  vs.  Xtrackers Harvest CSI

iShares China Large

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large Cap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, IShares China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers Harvest CSI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, Xtrackers Harvest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares China and Xtrackers Harvest

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

The idea behind iShares China Large Cap and Xtrackers Harvest CSI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.