Correlation Between IShares China and BetaShares Geared

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

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

Diversification Opportunities for IShares China and BetaShares Geared

0.27

Correlation Coefficient

IShares China  BetaShares Geared

Modest diversification

The 3 months correlation between IShares and BetaShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares China LargeCap and BetaShares Geared Australian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaShares Geared 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 LargeCap are associated (or correlated) with BetaShares Geared. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaShares Geared has no effect on the direction of IShares China i.e., IShares China and BetaShares Geared go up and down completely randomly.

Pair Corralation between IShares China and BetaShares Geared

Assuming the 90 days trading horizon iShares China LargeCap is expected to generate 1.02 times more return on investment than BetaShares Geared. However, IShares China is 1.02 times more volatile than BetaShares Geared Australian. It trades about 0.23 of its potential returns per unit of risk. BetaShares Geared Australian is currently generating about -0.08 per unit of risk. If you would invest  4,492  in iShares China LargeCap on December 1, 2024 and sell it today you would earn a total of  1,148  from holding iShares China LargeCap or generate 25.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

iShares China LargeCap  vs.  BetaShares Geared Australian

iShares China LargeCap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China LargeCap are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares China unveiled solid returns over the last few months and may actually be approaching a breakup point.

BetaShares Geared

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaShares Geared Australian has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with IShares China and BetaShares Geared

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

The idea behind iShares China LargeCap and BetaShares Geared Australian 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.