Correlation Between Matthews Japan and Matthews Asia

Can any of the company-specific risk be diversified away by investing in both Matthews Japan 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 Matthews Japan and Matthews Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Matthews Japan Fund and Matthews Asia Small, you can compare the effects of market volatilities on Matthews Japan 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 Matthews Japan with a short position of Matthews Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Japan and Matthews Asia.

Diversification Opportunities for Matthews Japan and Matthews Asia

0.52

Correlation Coefficient

Matthews Japan  Matthews Asia

Very weak diversification

The 3 months correlation between Matthews and Matthews is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Japan Fund and Matthews Asia Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Small and Matthews Japan 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 Japan Fund 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 Small has no effect on the direction of Matthews Japan i.e., Matthews Japan and Matthews Asia go up and down completely randomly.

Pair Corralation between Matthews Japan and Matthews Asia

Assuming the 90 days horizon Matthews Japan is expected to generate 1.68 times less return on investment than Matthews Asia. In addition to that, Matthews Japan is 1.25 times more volatile than Matthews Asia Small. It trades about 0.05 of its total potential returns per unit of risk. Matthews Asia Small is currently generating about 0.11 per unit of volatility. If you would invest  2,380  in Matthews Asia Small on May 5, 2025 and sell it today you would earn a total of  147.00  from holding Matthews Asia Small or generate 6.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Matthews Japan Fund  vs.  Matthews Asia Small

Matthews Japan

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Japan Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Matthews Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews Asia Small

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Asia Small are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Matthews Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matthews Japan and Matthews Asia

The main advantage of trading using opposite Matthews Japan and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Japan 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 Matthews Japan Fund and Matthews Asia Small 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.