Correlation Between Dow Jones and Matthews China
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Matthews 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 Dow Jones and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Matthews China Dividend, you can compare the effects of market volatilities on Dow Jones and Matthews 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 Dow Jones with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Matthews China.
Diversification Opportunities for Dow Jones and Matthews China
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Matthews is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Matthews China Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Dividend and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Dividend has no effect on the direction of Dow Jones i.e., Dow Jones and Matthews China go up and down completely randomly.
Pair Corralation between Dow Jones and Matthews China
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.53 times more return on investment than Matthews China. However, Dow Jones Industrial is 1.9 times less risky than Matthews China. It trades about 0.08 of its potential returns per unit of risk. Matthews China Dividend is currently generating about -0.01 per unit of risk. If you would invest 3,347,646 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 1,124,560 from holding Dow Jones Industrial or generate 33.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Matthews China Dividend
Performance |
| Timeline |
Dow Jones and Matthews China Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Matthews China Dividend
Pair trading matchups for Matthews China
Pair Trading with Dow Jones and Matthews China
The main advantage of trading using opposite Dow Jones and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Matthews 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 Matthews China will offset losses from the drop in Matthews China's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| Matthews China vs. Matthews China Dividend | Matthews China vs. Matthews China Fund | Matthews China vs. Matthews China Small | Matthews China vs. Aquagold International |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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