Correlation Between Matthews China and Morningstar Unconstrained
Can any of the company-specific risk be diversified away by investing in both Matthews China and Morningstar Unconstrained 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 Morningstar Unconstrained 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 Morningstar Unconstrained Allocation, you can compare the effects of market volatilities on Matthews China and Morningstar Unconstrained 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 Morningstar Unconstrained. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Morningstar Unconstrained.
Diversification Opportunities for Matthews China and Morningstar Unconstrained
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Matthews and Morningstar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Morningstar Unconstrained Allo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Unconstrained 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 Morningstar Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Unconstrained has no effect on the direction of Matthews China i.e., Matthews China and Morningstar Unconstrained go up and down completely randomly.
Pair Corralation between Matthews China and Morningstar Unconstrained
Assuming the 90 days horizon Matthews China is expected to generate 1.61 times less return on investment than Morningstar Unconstrained. In addition to that, Matthews China is 2.44 times more volatile than Morningstar Unconstrained Allocation. It trades about 0.01 of its total potential returns per unit of risk. Morningstar Unconstrained Allocation is currently generating about 0.06 per unit of volatility. If you would invest 914.00 in Morningstar Unconstrained Allocation on November 27, 2024 and sell it today you would earn a total of 192.00 from holding Morningstar Unconstrained Allocation or generate 21.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews China Fund vs. Morningstar Unconstrained Allo
Performance |
| Timeline |
| Matthews China |
| Morningstar Unconstrained |
Matthews China and Morningstar Unconstrained Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews China and Morningstar Unconstrained
The main advantage of trading using opposite Matthews China and Morningstar Unconstrained positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, Morningstar Unconstrained 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 Morningstar Unconstrained will offset losses from the drop in Morningstar Unconstrained'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 |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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