Correlation Between Snap and Matthews Asia
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Matthews Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Matthews Asia Innovators, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Matthews Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Matthews Asia.
Diversification Opportunities for Snap and Matthews Asia
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Matthews is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Matthews Asia Innovators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Innovators and Snap 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 Snap Inc 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 Innovators has no effect on the direction of Snap i.e., Snap and Matthews Asia go up and down completely randomly.
Pair Corralation between Snap and Matthews Asia
Given the investment horizon of 90 days Snap Inc is expected to generate 3.5 times more return on investment than Matthews Asia. However, Snap is 3.5 times more volatile than Matthews Asia Innovators. It trades about 0.1 of its potential returns per unit of risk. Matthews Asia Innovators is currently generating about -0.07 per unit of risk. If you would invest 1,071 in Snap Inc on August 28, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Matthews Asia Innovators
Performance |
| Timeline |
| Snap Inc |
| Matthews Asia Innovators |
Snap and Matthews Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Matthews Asia
The main advantage of trading using opposite Snap and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Matthews Asia Innovators 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.| Matthews Asia vs. Matthews China Active | Matthews Asia vs. MAYBANK EMERGING ETF | Matthews Asia vs. Matthews Emerging Markets | Matthews Asia vs. JP Morgan Exchange Traded |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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