Correlation Between Matthews China and Causeway Emerging
Can any of the company-specific risk be diversified away by investing in both Matthews China and Causeway Emerging 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 Causeway Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Small and Causeway Emerging Markets, you can compare the effects of market volatilities on Matthews China and Causeway Emerging 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 Causeway Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Causeway Emerging.
Diversification Opportunities for Matthews China and Causeway Emerging
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and Causeway is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Small and Causeway Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Causeway Emerging Markets 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 Small are associated (or correlated) with Causeway Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Causeway Emerging Markets has no effect on the direction of Matthews China i.e., Matthews China and Causeway Emerging go up and down completely randomly.
Pair Corralation between Matthews China and Causeway Emerging
Assuming the 90 days horizon Matthews China Small is expected to generate 1.66 times more return on investment than Causeway Emerging. However, Matthews China is 1.66 times more volatile than Causeway Emerging Markets. It trades about 0.03 of its potential returns per unit of risk. Causeway Emerging Markets is currently generating about 0.01 per unit of risk. If you would invest 904.00 in Matthews China Small on November 28, 2024 and sell it today you would earn a total of 55.00 from holding Matthews China Small or generate 6.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Small vs. Causeway Emerging Markets
Performance |
| Timeline |
| Matthews China Small |
| Causeway Emerging Markets |
Matthews China and Causeway Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Causeway Emerging
The main advantage of trading using opposite Matthews China and Causeway Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Causeway Emerging 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 Causeway Emerging will offset losses from the drop in Causeway Emerging's long position.| Matthews China vs. Matthews China Dividend | Matthews China vs. Matthews Asia Innovators | Matthews China vs. Matthews Asia Small | Matthews China vs. Matthews China Fund |
| Causeway Emerging vs. Metropolitan West Ultra | Causeway Emerging vs. Aqr Sustainable Long Short | Causeway Emerging vs. Franklin Federal Limited Term | Causeway Emerging vs. Siit Emerging Markets |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |