Correlation Between IShares MSCI and Matthews Emerging

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

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

Diversification Opportunities for IShares MSCI and Matthews Emerging

0.58

Correlation Coefficient

IShares MSCI  Matthews Emerging

Very weak diversification

The 3 months correlation between IShares and Matthews is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Matthews Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Emerging Markets 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 China are associated (or correlated) with Matthews Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Emerging Markets has no effect on the direction of IShares MSCI i.e., IShares MSCI and Matthews Emerging go up and down completely randomly.

Pair Corralation between IShares MSCI and Matthews Emerging

Given the investment horizon of 90 days iShares MSCI China is expected to under-perform the Matthews Emerging. In addition to that, IShares MSCI is 3.18 times more volatile than Matthews Emerging Markets. It trades about -0.09 of its total potential returns per unit of risk. Matthews Emerging Markets is currently generating about -0.04 per unit of volatility. If you would invest  3,027  in Matthews Emerging Markets on October 8, 2024 and sell it today you would lose (50.00) from holding Matthews Emerging Markets or give up 1.65% of portfolio value over 90 days.

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

iShares MSCI China  vs.  Matthews Emerging Markets

iShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Matthews Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Matthews Emerging is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and Matthews Emerging

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

The idea behind iShares MSCI China and Matthews Emerging Markets 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.