Correlation Between Matthews China and Otter Creek
Can any of the company-specific risk be diversified away by investing in both Matthews China and Otter Creek 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 Otter Creek 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 Otter Creek Longshort, you can compare the effects of market volatilities on Matthews China and Otter Creek 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 Otter Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Otter Creek.
Diversification Opportunities for Matthews China and Otter Creek
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Matthews and Otter is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Small and Otter Creek Longshort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Creek Longshort 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 Otter Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Creek Longshort has no effect on the direction of Matthews China i.e., Matthews China and Otter Creek go up and down completely randomly.
Pair Corralation between Matthews China and Otter Creek
Assuming the 90 days horizon Matthews China Small is expected to under-perform the Otter Creek. In addition to that, Matthews China is 2.02 times more volatile than Otter Creek Longshort. It trades about -0.07 of its total potential returns per unit of risk. Otter Creek Longshort is currently generating about 0.05 per unit of volatility. If you would invest 1,488 in Otter Creek Longshort on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Otter Creek Longshort or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Matthews China Small vs. Otter Creek Longshort
Performance |
| Timeline |
| Matthews China Small |
| Otter Creek Longshort |
Matthews China and Otter Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Otter Creek
The main advantage of trading using opposite Matthews China and Otter Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Otter Creek 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 Otter Creek will offset losses from the drop in Otter Creek'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 |
| Otter Creek vs. Boston Partners Global | Otter Creek vs. Asg Managed Futures | Otter Creek vs. Pimco Trends Managed | Otter Creek vs. Aqr Long Short Equity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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