Correlation Between Matthews China and Matthews Asia
Can any of the company-specific risk be diversified away by investing in both Matthews China and Matthews Asia 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 Asia 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 Asia Small, you can compare the effects of market volatilities on Matthews China and Matthews Asia 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 Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Matthews Asia.
Diversification Opportunities for Matthews China and Matthews Asia
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between MATTHEWS and Matthews is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Matthews Asia Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia 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 Fund are associated (or correlated) with Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Small has no effect on the direction of Matthews China i.e., Matthews China and Matthews Asia go up and down completely randomly.
Pair Corralation between Matthews China and Matthews Asia
Assuming the 90 days horizon Matthews China Fund is expected to generate 2.35 times more return on investment than Matthews Asia. However, Matthews China is 2.35 times more volatile than Matthews Asia Small. It trades about 0.05 of its potential returns per unit of risk. Matthews Asia Small is currently generating about -0.01 per unit of risk. If you would invest 1,223 in Matthews China Fund on August 29, 2024 and sell it today you would earn a total of 161.00 from holding Matthews China Fund or generate 13.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Fund vs. Matthews Asia Small
Performance |
| Timeline |
| Matthews China |
| Matthews Asia Small |
Matthews China and Matthews Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Matthews Asia
The main advantage of trading using opposite Matthews China and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Matthews Asia 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 Asia will offset losses from the drop in Matthews Asia'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 Asia vs. Matthews Asia Dividend | Matthews Asia vs. Matthews Asia Growth | Matthews Asia vs. Matthews Asia Innovators | Matthews Asia 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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