Correlation Between Matthews China and Matthews Asian
Can any of the company-specific risk be diversified away by investing in both Matthews China and Matthews Asian 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 Matthews Asian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Fund and Matthews Asian Growth, you can compare the effects of market volatilities on Matthews China and Matthews Asian 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 Matthews Asian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Matthews Asian.
Diversification Opportunities for Matthews China and Matthews Asian
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and Matthews is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Matthews Asian Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asian Growth 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 Fund are associated (or correlated) with Matthews Asian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asian Growth has no effect on the direction of Matthews China i.e., Matthews China and Matthews Asian go up and down completely randomly.
Pair Corralation between Matthews China and Matthews Asian
Assuming the 90 days horizon Matthews China Fund is expected to generate 2.56 times more return on investment than Matthews Asian. However, Matthews China is 2.56 times more volatile than Matthews Asian Growth. It trades about 0.26 of its potential returns per unit of risk. Matthews Asian Growth is currently generating about 0.18 per unit of risk. If you would invest 1,363 in Matthews China Fund on November 27, 2024 and sell it today you would earn a total of 113.00 from holding Matthews China Fund or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Fund vs. Matthews Asian Growth
Performance |
| Timeline |
| Matthews China |
| Matthews Asian Growth |
Matthews China and Matthews Asian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Matthews Asian
The main advantage of trading using opposite Matthews China and Matthews Asian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Matthews Asian 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 Asian will offset losses from the drop in Matthews Asian's long position.| Matthews China vs. Matthews India Fund | Matthews China vs. Matthews Pacific Tiger | Matthews China vs. Matthews Asian Growth | Matthews China vs. Guinness Atkinson China |
| Matthews Asian vs. Matthews Pacific Tiger | Matthews Asian vs. Matthews China Fund | Matthews Asian vs. Matthews Asia Dividend | Matthews Asian 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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