Correlation Between Vanguard Small and Matthews International
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and Matthews International 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 Vanguard Small and Matthews International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Matthews International Funds, you can compare the effects of market volatilities on Vanguard Small and Matthews International 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 Vanguard Small with a short position of Matthews International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Matthews International.
Diversification Opportunities for Vanguard Small and Matthews International
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Matthews is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Matthews International Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews International and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with Matthews International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews International has no effect on the direction of Vanguard Small i.e., Vanguard Small and Matthews International go up and down completely randomly.
Pair Corralation between Vanguard Small and Matthews International
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 0.88 times more return on investment than Matthews International. However, Vanguard Small Cap Index is 1.13 times less risky than Matthews International. It trades about 0.31 of its potential returns per unit of risk. Matthews International Funds is currently generating about -0.13 per unit of risk. If you would invest 23,914 in Vanguard Small Cap Index on August 29, 2024 and sell it today you would earn a total of 2,077 from holding Vanguard Small Cap Index or generate 8.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Matthews International Funds
Performance |
| Timeline |
| Vanguard Small Cap |
| Matthews International |
Vanguard Small and Matthews International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Matthews International
The main advantage of trading using opposite Vanguard Small and Matthews International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, Matthews International 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 International will offset losses from the drop in Matthews International's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Matthews International vs. Freedom Day Dividend | Matthews International vs. Davis Select International | Matthews International vs. iShares MSCI China | Matthews International vs. SmartETFs Dividend Builder |
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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