Correlation Between Matthews China and IShares Russell

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

By analyzing existing cross correlation between Matthews China Discovery and iShares Russell Mid Cap, you can compare the effects of market volatilities on Matthews China and IShares Russell 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 Matthews China with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and IShares Russell.

Diversification Opportunities for Matthews China and IShares Russell

-0.57

Correlation Coefficient

Matthews China  IShares Russell

Excellent diversification

The 3 months correlation between Matthews and IShares is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid and Matthews 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 Matthews China Discovery are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Mid has no effect on the direction of Matthews China i.e., Matthews China and IShares Russell go up and down completely randomly.

Pair Corralation between Matthews China and IShares Russell

Given the investment horizon of 90 days Matthews China Discovery is expected to under-perform the IShares Russell. In addition to that, Matthews China is 1.02 times more volatile than iShares Russell Mid Cap. It trades about -0.33 of its total potential returns per unit of risk. iShares Russell Mid Cap is currently generating about -0.16 per unit of volatility. If you would invest  13,547  in iShares Russell Mid Cap on October 8, 2024 and sell it today you would lose (558.00) from holding iShares Russell Mid Cap or give up 4.12% of portfolio value over 90 days.

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

Matthews China Discovery  vs.  iShares Russell Mid Cap

Matthews China Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews China Discovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's technical 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.

iShares Russell Mid

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Matthews China and IShares Russell

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

The idea behind Matthews China Discovery and iShares Russell Mid Cap 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.