Correlation Between Matthews Asia and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Matthews Asia and Dow Jones 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 Matthews Asia and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews Asia Innovators and Dow Jones Industrial, you can compare the effects of market volatilities on Matthews Asia and Dow Jones 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 Matthews Asia with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Dow Jones.
Diversification Opportunities for Matthews Asia and Dow Jones
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and Dow is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Innovators and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Matthews Asia 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 Matthews Asia Innovators are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Matthews Asia i.e., Matthews Asia and Dow Jones go up and down completely randomly.
Pair Corralation between Matthews Asia and Dow Jones
Assuming the 90 days horizon Matthews Asia is expected to generate 1.32 times less return on investment than Dow Jones. In addition to that, Matthews Asia is 1.61 times more volatile than Dow Jones Industrial. It trades about 0.08 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.16 per unit of volatility. If you would invest 4,133,505 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 338,701 from holding Dow Jones Industrial or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews Asia Innovators vs. Dow Jones Industrial
Performance |
| Timeline |
Matthews Asia and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Matthews Asia Innovators
Pair trading matchups for Matthews Asia
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Matthews Asia and Dow Jones
The main advantage of trading using opposite Matthews Asia and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Matthews Asia vs. Matthews Asia Dividend | Matthews Asia vs. Wcm Focused International | Matthews Asia vs. Invesco Disciplined Equity | Matthews Asia vs. Matthews Asian Growth |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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