Correlation Between Matthews China and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Matthews China and Goldman Sachs 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 Goldman Sachs 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 Goldman Sachs MarketBeta, you can compare the effects of market volatilities on Matthews China and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Goldman Sachs.
Diversification Opportunities for Matthews China and Goldman Sachs
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Matthews and Goldman is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and Goldman Sachs MarketBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs MarketBeta 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs MarketBeta has no effect on the direction of Matthews China i.e., Matthews China and Goldman Sachs go up and down completely randomly.
Pair Corralation between Matthews China and Goldman Sachs
Given the investment horizon of 90 days Matthews China Discovery is expected to generate 1.89 times more return on investment than Goldman Sachs. However, Matthews China is 1.89 times more volatile than Goldman Sachs MarketBeta. It trades about -0.03 of its potential returns per unit of risk. Goldman Sachs MarketBeta is currently generating about -0.11 per unit of risk. If you would invest 2,739 in Matthews China Discovery on September 2, 2024 and sell it today you would lose (38.00) from holding Matthews China Discovery or give up 1.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Discovery vs. Goldman Sachs MarketBeta
Performance |
| Timeline |
| Matthews China Discovery |
| Goldman Sachs MarketBeta |
Matthews China and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Goldman Sachs
The main advantage of trading using opposite Matthews China and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Matthews China vs. FT Vest Equity | Matthews China vs. Northern Lights | Matthews China vs. Dimensional International High | Matthews China vs. Davis Select International |
| Goldman Sachs vs. FT Vest Equity | Goldman Sachs vs. Northern Lights | Goldman Sachs vs. Dimensional International High | Goldman Sachs vs. Matthews China Discovery |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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