Correlation Between IShares MSCI and Matthews International

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

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

Diversification Opportunities for IShares MSCI and Matthews International

0.99

Correlation Coefficient

IShares MSCI  Matthews International

No risk reduction

The 3 months correlation between IShares and Matthews is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI India and Matthews International Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International and IShares MSCI 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 iShares MSCI India are associated (or correlated) with Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of IShares MSCI i.e., IShares MSCI and Matthews International go up and down completely randomly.

Pair Corralation between IShares MSCI and Matthews International

Given the investment horizon of 90 days iShares MSCI India is expected to under-perform the Matthews International. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI India is 1.16 times less risky than Matthews International. The etf trades about -0.1 of its potential returns per unit of risk. The Matthews International Funds is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  3,218  in Matthews International Funds on August 30, 2024 and sell it today you would lose (159.00) from holding Matthews International Funds or give up 4.94% of portfolio value over 90 days.

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

iShares MSCI India  vs.  Matthews International Funds

iShares MSCI India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews International Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Matthews International is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and Matthews International

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

The idea behind iShares MSCI India and Matthews International Funds 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.