Correlation Between Matthews Emerging and IShares MSCI

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

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

Diversification Opportunities for Matthews Emerging and IShares MSCI

0.58

Correlation Coefficient

Matthews Emerging  IShares MSCI

Very weak diversification

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

Pair Corralation between Matthews Emerging and IShares MSCI

Given the investment horizon of 90 days Matthews Emerging Markets is expected to generate 0.31 times more return on investment than IShares MSCI. However, Matthews Emerging Markets is 3.18 times less risky than IShares MSCI. It trades about -0.04 of its potential returns per unit of risk. iShares MSCI China is currently generating about -0.09 per unit of risk. 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

Matthews Emerging Markets  vs.  iShares MSCI China

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.

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.

Pair Trading with Matthews Emerging and IShares MSCI

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

The idea behind Matthews Emerging Markets and iShares MSCI China 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 Commodity Directory module to find actively traded commodities issued by global exchanges.