Correlation Between Armada Hflr and IShares China

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

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

Diversification Opportunities for Armada Hflr and IShares China

-0.63

Correlation Coefficient

Armada Hflr  IShares China

Excellent diversification

The 3 months correlation between Armada and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and iShares China Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China Large and Armada Hflr 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 Armada Hflr Pr 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 Large has no effect on the direction of Armada Hflr i.e., Armada Hflr and IShares China go up and down completely randomly.

Pair Corralation between Armada Hflr and IShares China

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the IShares China. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.64 times less risky than IShares China. The stock trades about -0.15 of its potential returns per unit of risk. The iShares China Large is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,490  in iShares China Large on September 24, 2024 and sell it today you would earn a total of  850.00  from holding iShares China Large or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Armada Hflr Pr  vs.  iShares China Large

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

iShares China Large

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, IShares China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Armada Hflr and IShares China

The main advantage of trading using opposite Armada Hflr and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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 Armada Hflr Pr and iShares China Large 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.