Correlation Between Matthews China and Matthews Pacific
Can any of the company-specific risk be diversified away by investing in both Matthews China and Matthews Pacific 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 Pacific 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 Pacific Tiger, you can compare the effects of market volatilities on Matthews China and Matthews Pacific 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 Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Matthews Pacific.
Diversification Opportunities for Matthews China and Matthews Pacific
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Matthews and Matthews is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Matthews Pacific Tiger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Pacific Tiger 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 Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Pacific Tiger has no effect on the direction of Matthews China i.e., Matthews China and Matthews Pacific go up and down completely randomly.
Pair Corralation between Matthews China and Matthews Pacific
Assuming the 90 days horizon Matthews China Fund is expected to generate 1.95 times more return on investment than Matthews Pacific. However, Matthews China is 1.95 times more volatile than Matthews Pacific Tiger. It trades about 0.04 of its potential returns per unit of risk. Matthews Pacific Tiger is currently generating about 0.03 per unit of risk. If you would invest 1,187 in Matthews China Fund on August 26, 2024 and sell it today you would earn a total of 165.00 from holding Matthews China Fund or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Fund vs. Matthews Pacific Tiger
Performance |
| Timeline |
| Matthews China |
| Matthews Pacific Tiger |
Matthews China and Matthews Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Matthews Pacific
The main advantage of trading using opposite Matthews China and Matthews Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Matthews Pacific 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 Pacific will offset losses from the drop in Matthews Pacific's long position.| Matthews China vs. Matthews Pacific Tiger | Matthews China vs. Matthews India Fund | Matthews China vs. Matthews China Dividend | Matthews China vs. Matthews Asia Growth |
| Matthews Pacific vs. Matthews Asia Dividend | Matthews Pacific vs. Wcm Focused International | Matthews Pacific vs. Invesco Disciplined Equity | Matthews Pacific vs. Matthews Asian 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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