Correlation Between GM and Matthews China
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Matthews China Fund, you can compare the effects of market volatilities on GM 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 GM with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Matthews China.
Diversification Opportunities for GM and Matthews China
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Matthews is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Matthews China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China and GM 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 General Motors 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 has no effect on the direction of GM i.e., GM and Matthews China go up and down completely randomly.
Pair Corralation between GM and Matthews China
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Matthews China. In addition to that, GM is 1.46 times more volatile than Matthews China Fund. It trades about -0.34 of its total potential returns per unit of risk. Matthews China Fund is currently generating about 0.26 per unit of volatility. If you would invest 1,362 in Matthews China Fund on November 27, 2024 and sell it today you would earn a total of 112.00 from holding Matthews China Fund or generate 8.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Matthews China Fund
Performance |
| Timeline |
| General Motors |
| Matthews China |
GM and Matthews China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Matthews China
The main advantage of trading using opposite GM and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Matthews China Fund 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.| Matthews China vs. Matthews Pacific Tiger | Matthews China vs. Matthews India Fund | Matthews China vs. Matthews China Dividend | Matthews China vs. Matthews Asia Growth |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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