Correlation Between IShares MSCI and Betashares Asia

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

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

Diversification Opportunities for IShares MSCI and Betashares Asia

0.94

Correlation Coefficient

IShares MSCI  Betashares Asia

Almost no diversification

The 3 months correlation between IShares and Betashares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Emerging and Betashares Asia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Asia Tech 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 Emerging are associated (or correlated) with Betashares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Asia Tech has no effect on the direction of IShares MSCI i.e., IShares MSCI and Betashares Asia go up and down completely randomly.

Pair Corralation between IShares MSCI and Betashares Asia

Assuming the 90 days trading horizon IShares MSCI is expected to generate 2.02 times less return on investment than Betashares Asia. But when comparing it to its historical volatility, iShares MSCI Emerging is 1.9 times less risky than Betashares Asia. It trades about 0.16 of its potential returns per unit of risk. Betashares Asia Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  865.00  in Betashares Asia Technology on September 19, 2024 and sell it today you would earn a total of  141.00  from holding Betashares Asia Technology or generate 16.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

iShares MSCI Emerging  vs.  Betashares Asia Technology

iShares MSCI Emerging

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Emerging are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Betashares Asia Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Betashares Asia Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Betashares Asia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and Betashares Asia

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

The idea behind iShares MSCI Emerging and Betashares Asia Technology 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.