Correlation Between CHIK and IShares China

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

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

Diversification Opportunities for CHIK and IShares China

-0.37

Correlation Coefficient

CHIK  IShares China

Very good diversification

The 3 months correlation between CHIK and IShares is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding CHIK and iShares China Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China Large and CHIK 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 CHIK 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 CHIK i.e., CHIK and IShares China go up and down completely randomly.

Pair Corralation between CHIK and IShares China

If you would invest  2,727  in iShares China Large Cap on September 22, 2024 and sell it today you would earn a total of  315.00  from holding iShares China Large Cap or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

CHIK  vs.  iShares China Large Cap

CHIK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHIK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, CHIK is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

iShares China Large

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, IShares China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHIK and IShares China

The main advantage of trading using opposite CHIK and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIK 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 CHIK and iShares China Large 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.