Correlation Between Matthews China and Matthews Asia
Can any of the company-specific risk be diversified away by investing in both Matthews China and Matthews Asia 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 Matthews Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Fund and Matthews Asia Growth, you can compare the effects of market volatilities on Matthews China and Matthews Asia 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 Matthews Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Matthews Asia.
Diversification Opportunities for Matthews China and Matthews Asia
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Matthews and Matthews is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Matthews Asia Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Growth 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 Fund are associated (or correlated) with Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Growth has no effect on the direction of Matthews China i.e., Matthews China and Matthews Asia go up and down completely randomly.
Pair Corralation between Matthews China and Matthews Asia
Assuming the 90 days horizon Matthews China Fund is expected to under-perform the Matthews Asia. In addition to that, Matthews China is 1.78 times more volatile than Matthews Asia Growth. It trades about -0.01 of its total potential returns per unit of risk. Matthews Asia Growth is currently generating about 0.02 per unit of volatility. If you would invest 2,166 in Matthews Asia Growth on August 29, 2024 and sell it today you would earn a total of 209.00 from holding Matthews Asia Growth or generate 9.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Matthews China Fund vs. Matthews Asia Growth
Performance |
Timeline |
Matthews China |
Matthews Asia Growth |
Matthews China and Matthews Asia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Matthews China and Matthews Asia
The main advantage of trading using opposite Matthews China and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Matthews Asia 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 Matthews Asia will offset losses from the drop in Matthews Asia's long position.Matthews China vs. Matthews Pacific Tiger | Matthews China vs. Matthews India Fund | Matthews China vs. Matthews China Dividend | Matthews China vs. Matthews Asia Growth |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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