Correlation Between IShares China and WisdomTree Physical

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

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

Diversification Opportunities for IShares China and WisdomTree Physical

0.68

Correlation Coefficient

IShares China  WisdomTree Physical

Poor diversification

The 3 months correlation between IShares and WisdomTree is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and WisdomTree Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Physical Gold and IShares China 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 China CNY are associated (or correlated) with WisdomTree Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Physical Gold has no effect on the direction of IShares China i.e., IShares China and WisdomTree Physical go up and down completely randomly.

Pair Corralation between IShares China and WisdomTree Physical

Assuming the 90 days trading horizon IShares China is expected to generate 23.55 times less return on investment than WisdomTree Physical. But when comparing it to its historical volatility, iShares China CNY is 8.95 times less risky than WisdomTree Physical. It trades about 0.09 of its potential returns per unit of risk. WisdomTree Physical Gold is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  27,637  in WisdomTree Physical Gold on September 1, 2025 and sell it today you would earn a total of  6,107  from holding WisdomTree Physical Gold or generate 22.1% return on investment over 90 days.

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

iShares China CNY  vs.  WisdomTree Physical Gold

iShares China CNY

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China CNY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares China is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Physical Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Physical Gold are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Physical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares China and WisdomTree Physical

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

The idea behind iShares China CNY and WisdomTree Physical Gold 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.