Correlation Between Beta Shares and IShares China

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

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

Diversification Opportunities for Beta Shares and IShares China

0.05

Correlation Coefficient

Beta Shares  IShares China

Significant diversification

The 3 months correlation between Beta and IShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Beta Shares SPASX and iShares China LargeCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China LargeCap and Beta Shares 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 Beta Shares SPASX are associated (or correlated) with IShares China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China LargeCap has no effect on the direction of Beta Shares i.e., Beta Shares and IShares China go up and down completely randomly.

Pair Corralation between Beta Shares and IShares China

Assuming the 90 days trading horizon Beta Shares is expected to generate 4.37 times less return on investment than IShares China. But when comparing it to its historical volatility, Beta Shares SPASX is 1.92 times less risky than IShares China. It trades about 0.07 of its potential returns per unit of risk. iShares China LargeCap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,852  in iShares China LargeCap on December 29, 2024 and sell it today you would earn a total of  816.00  from holding iShares China LargeCap or generate 16.82% return on investment over 90 days.

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

Beta Shares SPASX  vs.  iShares China LargeCap

Beta Shares SPASX

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Shares SPASX are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Beta Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares China LargeCap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China LargeCap are ranked lower than 11 (%) 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.

Pair Trading with Beta Shares and IShares China

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

The idea behind Beta Shares SPASX and iShares China LargeCap 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.