Correlation Between Matthews China and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Matthews China and Alpha Architect 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 Alpha Architect 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 Alpha Architect International, you can compare the effects of market volatilities on Matthews China and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Alpha Architect.
Diversification Opportunities for Matthews China and Alpha Architect
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Matthews and Alpha is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and Alpha Architect International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Inte 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 Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Inte has no effect on the direction of Matthews China i.e., Matthews China and Alpha Architect go up and down completely randomly.
Pair Corralation between Matthews China and Alpha Architect
Given the investment horizon of 90 days Matthews China Discovery is expected to under-perform the Alpha Architect. In addition to that, Matthews China is 2.02 times more volatile than Alpha Architect International. It trades about -0.04 of its total potential returns per unit of risk. Alpha Architect International is currently generating about -0.01 per unit of volatility. If you would invest 2,470 in Alpha Architect International on September 1, 2024 and sell it today you would lose (6.00) from holding Alpha Architect International or give up 0.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Discovery vs. Alpha Architect International
Performance |
| Timeline |
| Matthews China Discovery |
| Alpha Architect Inte |
Matthews China and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Alpha Architect
The main advantage of trading using opposite Matthews China and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect's 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 |
| Alpha Architect vs. FT Vest Equity | Alpha Architect vs. Northern Lights | Alpha Architect vs. Dimensional International High | Alpha Architect 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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