Correlation Between IShares China and Matthews China

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

Diversification Opportunities for IShares China and Matthews China

0.95

Correlation Coefficient

IShares China  Matthews China

Almost no diversification

The 3 months correlation between IShares and Matthews is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large Cap 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 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 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 China i.e., IShares China and Matthews China go up and down completely randomly.

Pair Corralation between IShares China and Matthews China

Considering the 90-day investment horizon iShares China Large Cap is expected to generate 1.12 times more return on investment than Matthews China. However, IShares China is 1.12 times more volatile than Matthews China Active. It trades about -0.05 of its potential returns per unit of risk. Matthews China Active is currently generating about -0.15 per unit of risk. If you would invest  3,101  in iShares China Large Cap on October 10, 2024 and sell it today you would lose (150.00) from holding iShares China Large Cap or give up 4.84% of portfolio value over 90 days.

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

iShares China Large Cap  vs.  Matthews China Active

iShares China Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares China Large Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 uncertain performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with IShares China and Matthews China

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

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.