Correlation Between Matthews China and Fidelity Momentum
Can any of the company-specific risk be diversified away by investing in both Matthews China and Fidelity Momentum 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 Fidelity Momentum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Discovery and Fidelity Momentum Factor, you can compare the effects of market volatilities on Matthews China and Fidelity Momentum 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 Fidelity Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Fidelity Momentum.
Diversification Opportunities for Matthews China and Fidelity Momentum
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Matthews and Fidelity is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and Fidelity Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum Factor 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 Discovery are associated (or correlated) with Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum Factor has no effect on the direction of Matthews China i.e., Matthews China and Fidelity Momentum go up and down completely randomly.
Pair Corralation between Matthews China and Fidelity Momentum
Given the investment horizon of 90 days Matthews China is expected to generate 2.26 times less return on investment than Fidelity Momentum. In addition to that, Matthews China is 2.14 times more volatile than Fidelity Momentum Factor. It trades about 0.02 of its total potential returns per unit of risk. Fidelity Momentum Factor is currently generating about 0.12 per unit of volatility. If you would invest 4,392 in Fidelity Momentum Factor on September 3, 2024 and sell it today you would earn a total of 2,811 from holding Fidelity Momentum Factor or generate 64.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 45.66% |
| Values | Daily Returns |
Matthews China Discovery vs. Fidelity Momentum Factor
Performance |
| Timeline |
| Matthews China Discovery |
| Fidelity Momentum Factor |
Matthews China and Fidelity Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Fidelity Momentum
The main advantage of trading using opposite Matthews China and Fidelity Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Fidelity Momentum 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 Fidelity Momentum will offset losses from the drop in Fidelity Momentum's long position.| Matthews China vs. FT Vest Equity | Matthews China vs. Northern Lights | Matthews China vs. Dimensional International High | Matthews China vs. JPMorgan Fundamental Data |
| Fidelity Momentum vs. FT Vest Equity | Fidelity Momentum vs. Northern Lights | Fidelity Momentum vs. Dimensional International High | Fidelity Momentum vs. JPMorgan Fundamental Data |
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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