Correlation Between IShares China and IShares Global

Can any of the company-specific risk be diversified away by investing in both IShares China and IShares Global 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 IShares Global 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 iShares Global Consumer, you can compare the effects of market volatilities on IShares China and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and IShares Global.

Diversification Opportunities for IShares China and IShares Global

-0.6

Correlation Coefficient

IShares China  IShares Global

Excellent diversification

The 3 months correlation between IShares and IShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding iShares China LargeCap and iShares Global Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Consumer 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Consumer has no effect on the direction of IShares China i.e., IShares China and IShares Global go up and down completely randomly.

Pair Corralation between IShares China and IShares Global

Assuming the 90 days trading horizon iShares China LargeCap is expected to under-perform the IShares Global. In addition to that, IShares China is 1.22 times more volatile than iShares Global Consumer. It trades about -0.18 of its total potential returns per unit of risk. iShares Global Consumer is currently generating about 0.2 per unit of volatility. If you would invest  9,429  in iShares Global Consumer on September 4, 2024 and sell it today you would earn a total of  350.00  from holding iShares Global Consumer or generate 3.71% return on investment over 90 days.

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

iShares China LargeCap  vs.  iShares Global Consumer

iShares China LargeCap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China LargeCap are ranked lower than 10 (%) 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.

iShares Global Consumer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Consumer are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares China and IShares Global

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

The idea behind iShares China LargeCap and iShares Global Consumer 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.