Correlation Between Matthews Asia and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Matthews Asia and Litman Gregory 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 Litman Gregory 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 Litman Gregory Masters, you can compare the effects of market volatilities on Matthews Asia and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Litman Gregory.
Diversification Opportunities for Matthews Asia and Litman Gregory
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and Litman is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Innovators and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Matthews Asia i.e., Matthews Asia and Litman Gregory go up and down completely randomly.
Pair Corralation between Matthews Asia and Litman Gregory
Assuming the 90 days horizon Matthews Asia Innovators is expected to under-perform the Litman Gregory. In addition to that, Matthews Asia is 9.55 times more volatile than Litman Gregory Masters. It trades about -0.03 of its total potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.26 per unit of volatility. If you would invest 989.00 in Litman Gregory Masters on September 3, 2024 and sell it today you would earn a total of 6.00 from holding Litman Gregory Masters or generate 0.61% 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. Litman Gregory Masters
Performance |
| Timeline |
| Matthews Asia Innovators |
| Litman Gregory Masters |
Matthews Asia and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews Asia and Litman Gregory
The main advantage of trading using opposite Matthews Asia and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's 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 |
| Litman Gregory vs. Vanguard Financials Index | Litman Gregory vs. Icon Financial Fund | Litman Gregory vs. Blackrock Financial Institutions | Litman Gregory vs. Mesirow Financial Small |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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