Correlation Between Matthews China and First Trust
Can any of the company-specific risk be diversified away by investing in both Matthews China and First Trust 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 China and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matthews China Discovery and First Trust Exchange Traded, you can compare the effects of market volatilities on Matthews China and First Trust 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 China with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and First Trust.
Diversification Opportunities for Matthews China and First Trust
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Matthews and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Discovery and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and Matthews China 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 China Discovery are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Matthews China i.e., Matthews China and First Trust go up and down completely randomly.
Pair Corralation between Matthews China and First Trust
Given the investment horizon of 90 days Matthews China Discovery is expected to generate 9.75 times more return on investment than First Trust. However, Matthews China is 9.75 times more volatile than First Trust Exchange Traded. It trades about 0.37 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.18 per unit of risk. If you would invest 2,379 in Matthews China Discovery on July 5, 2024 and sell it today you would earn a total of 631.00 from holding Matthews China Discovery or generate 26.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Matthews China Discovery vs. First Trust Exchange Traded
Performance |
Timeline |
Matthews China Discovery |
First Trust Exchange |
Matthews China and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Matthews China and First Trust
The main advantage of trading using opposite Matthews China and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews China position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.Matthews China vs. MicroAlgo | Matthews China vs. Aeye Inc | Matthews China vs. Malaga Financial | Matthews China vs. Knife River |
First Trust vs. HUMANA INC | First Trust vs. Aquagold International | First Trust vs. Barloworld Ltd ADR | First Trust vs. Thrivent High Yield |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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