Correlation Between Matthews Asia and Matthews Asia

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

Diversification Opportunities for Matthews Asia and Matthews Asia

0.88

Correlation Coefficient

Matthews Asia  Matthews Asia

Very poor diversification

The 3 months correlation between Matthews and Matthews is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Growth 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 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 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 Matthews Asia i.e., Matthews Asia and Matthews Asia go up and down completely randomly.

Pair Corralation between Matthews Asia and Matthews Asia

Assuming the 90 days horizon Matthews Asia Growth is expected to under-perform the Matthews Asia. But the mutual fund apears to be less risky and, when comparing its historical volatility, Matthews Asia Growth is 1.14 times less risky than Matthews Asia. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Matthews Asia Innovators is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,333  in Matthews Asia Innovators on August 16, 2024 and sell it today you would lose (20.00) from holding Matthews Asia Innovators or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Matthews Asia Growth  vs.  Matthews Asia Innovators

Matthews Asia Growth

Risk-Adjusted Performance

0 of 100

Weak

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 Asia Innovators

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Asia Innovators are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.

Pair Trading with Matthews Asia and Matthews Asia

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

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.