Correlation Between Matthews Asia and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both Matthews Asia and Hennessy Japan 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 Asia and Hennessy Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews Asia Dividend and Hennessy Japan Small, you can compare the effects of market volatilities on Matthews Asia and Hennessy Japan 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 Asia with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Hennessy Japan.
Diversification Opportunities for Matthews Asia and Hennessy Japan
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Matthews and Hennessy is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Dividend and Hennessy Japan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan Small and Matthews Asia 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 Asia Dividend are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan Small has no effect on the direction of Matthews Asia i.e., Matthews Asia and Hennessy Japan go up and down completely randomly.
Pair Corralation between Matthews Asia and Hennessy Japan
Assuming the 90 days horizon Matthews Asia Dividend is expected to under-perform the Hennessy Japan. But the mutual fund apears to be less risky and, when comparing its historical volatility, Matthews Asia Dividend is 1.3 times less risky than Hennessy Japan. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Hennessy Japan Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,717 in Hennessy Japan Small on September 13, 2024 and sell it today you would earn a total of 34.00 from holding Hennessy Japan Small or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matthews Asia Dividend vs. Hennessy Japan Small
Performance |
| Timeline |
| Matthews Asia Dividend |
| Hennessy Japan Small |
Matthews Asia and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matthews Asia and Hennessy Japan
The main advantage of trading using opposite Matthews Asia and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia position performs unexpectedly, Hennessy Japan 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 Hennessy Japan will offset losses from the drop in Hennessy Japan's long position.| Matthews Asia vs. Matthews Pacific Tiger | Matthews Asia vs. Sit Dividend Growth | Matthews Asia vs. Harbor Vertible Securities | Matthews Asia vs. Jpmorgan Unconstrained Debt |
| Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Wasatch Emerging India | Hennessy Japan vs. Global Opportunity Portfolio |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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