Correlation Between Matthews Asia and Matthews China

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Can any of the company-specific risk be diversified away by investing in both Matthews Asia 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 Asia 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 Asia Growth and Matthews China Fund, you can compare the effects of market volatilities on Matthews Asia 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 Asia with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Matthews China.

Diversification Opportunities for Matthews Asia and Matthews China

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Matthews and Matthews is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Growth 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 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 Growth 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 Asia i.e., Matthews Asia and Matthews China go up and down completely randomly.

Pair Corralation between Matthews Asia and Matthews China

Assuming the 90 days horizon Matthews Asia Growth is expected to generate 0.56 times more return on investment than Matthews China. However, Matthews Asia Growth is 1.8 times less risky than Matthews China. It trades about 0.03 of its potential returns per unit of risk. Matthews China Fund is currently generating about 0.0 per unit of risk. If you would invest  2,043  in Matthews Asia Growth on November 9, 2024 and sell it today you would earn a total of  233.00  from holding Matthews Asia Growth or generate 11.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Matthews Asia Growth  vs.  Matthews China Fund

 Performance 
       Timeline  
Matthews Asia Growth 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Matthews Asia Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Matthews Asia 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

Very Weak

 
Weak
 
Strong
Over the last 90 days Matthews China Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Matthews China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews Asia and Matthews China Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Matthews Asia and Matthews China

The main advantage of trading using opposite Matthews Asia and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia 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 Asia Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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