Correlation Between Matthews China and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Matthews China and Invesco SP 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 Invesco SP 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 Invesco SP SmallCap, you can compare the effects of market volatilities on Matthews China and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Invesco SP.
Diversification Opportunities for Matthews China and Invesco SP
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Matthews and Invesco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Matthews China i.e., Matthews China and Invesco SP go up and down completely randomly.
Pair Corralation between Matthews China and Invesco SP
Given the investment horizon of 90 days Matthews China Discovery is expected to generate 1.0 times more return on investment than Invesco SP. However, Matthews China Discovery is 1.0 times less risky than Invesco SP. It trades about 0.05 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about -0.02 per unit of risk. If you would invest 2,604 in Matthews China Discovery on October 25, 2024 and sell it today you would earn a total of 23.00 from holding Matthews China Discovery or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Discovery vs. Invesco SP SmallCap
Performance |
| Timeline |
| Matthews China Discovery |
| Invesco SP SmallCap |
Matthews China and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Invesco SP
The main advantage of trading using opposite Matthews China and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.| Matthews China vs. Matthews Emerging Markets | Matthews China vs. Morgan Stanley Pathway | Matthews China vs. Neuberger Berman ETF | Matthews China vs. Fidelity Small Mid Cap |
| Invesco SP vs. Dimensional ETF Trust | Invesco SP vs. Vanguard Small Cap Index | Invesco SP vs. First Trust Multi Manager | Invesco SP vs. Vanguard SP Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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