Correlation Between Matthews Pacific and Matthews China

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Can any of the company-specific risk be diversified away by investing in both Matthews Pacific and Matthews China 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 Pacific and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews Pacific Tiger and Matthews China Fund, you can compare the effects of market volatilities on Matthews Pacific and Matthews China 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 Pacific with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Pacific and Matthews China.

Diversification Opportunities for Matthews Pacific and Matthews China

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Matthews and MATTHEWS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Pacific Tiger and Matthews China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China and Matthews Pacific 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 Pacific Tiger are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China has no effect on the direction of Matthews Pacific i.e., Matthews Pacific and Matthews China go up and down completely randomly.

Pair Corralation between Matthews Pacific and Matthews China

Assuming the 90 days horizon Matthews Pacific Tiger is expected to generate 0.48 times more return on investment than Matthews China. However, Matthews Pacific Tiger is 2.08 times less risky than Matthews China. It trades about -0.2 of its potential returns per unit of risk. Matthews China Fund is currently generating about -0.2 per unit of risk. If you would invest  2,046  in Matthews Pacific Tiger on August 29, 2024 and sell it today you would lose (95.00) from holding Matthews Pacific Tiger or give up 4.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Matthews Pacific Tiger  vs.  Matthews China Fund

 Performance 
       Timeline  
Matthews Pacific Tiger 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Pacific Tiger are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Matthews Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Matthews China 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Matthews China showed solid returns over the last few months and may actually be approaching a breakup point.

Matthews Pacific and Matthews China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Matthews Pacific and Matthews China

The main advantage of trading using opposite Matthews Pacific and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Pacific position performs unexpectedly, Matthews China 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 China will offset losses from the drop in Matthews China's long position.
The idea behind Matthews Pacific Tiger and Matthews China Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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