Correlation Between Matthews China and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both Matthews China and Hennessy Japan 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 China and Hennessy Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Dividend and Hennessy Japan Small, you can compare the effects of market volatilities on Matthews China and Hennessy Japan 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 China with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Hennessy Japan.
Diversification Opportunities for Matthews China and Hennessy Japan
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Matthews and Hennessy is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Dividend and Hennessy Japan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan Small and Matthews 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 Matthews China Dividend are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan Small has no effect on the direction of Matthews China i.e., Matthews China and Hennessy Japan go up and down completely randomly.
Pair Corralation between Matthews China and Hennessy Japan
Assuming the 90 days horizon Matthews China Dividend is expected to under-perform the Hennessy Japan. In addition to that, Matthews China is 1.35 times more volatile than Hennessy Japan Small. It trades about -0.01 of its total potential returns per unit of risk. Hennessy Japan Small is currently generating about 0.05 per unit of volatility. If you would invest 1,395 in Hennessy Japan Small on August 29, 2024 and sell it today you would earn a total of 346.00 from holding Hennessy Japan Small or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Dividend vs. Hennessy Japan Small
Performance |
| Timeline |
| Matthews China Dividend |
| Hennessy Japan Small |
Matthews China and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Hennessy Japan
The main advantage of trading using opposite Matthews China and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Hennessy Japan 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 Hennessy Japan will offset losses from the drop in Hennessy Japan's long position.| Matthews China vs. Fidelity China Region | Matthews China vs. Fidelity China Region | Matthews China vs. Matthews China Fund | Matthews China vs. Matthews China Small |
| Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Wasatch Emerging India | Hennessy Japan vs. Global Opportunity Portfolio |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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