Correlation Between Guggenheim Alpha and Matthews China

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

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

Diversification Opportunities for Guggenheim Alpha and Matthews China

-0.68

Correlation Coefficient

Guggenheim Alpha  Matthews China

Excellent diversification

The 3 months correlation between Guggenheim and Matthews is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Guggenheim Alpha Opportunity and Matthews China Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Small and Guggenheim Alpha 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 Guggenheim Alpha Opportunity are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Small has no effect on the direction of Guggenheim Alpha i.e., Guggenheim Alpha and Matthews China go up and down completely randomly.

Pair Corralation between Guggenheim Alpha and Matthews China

Assuming the 90 days horizon Guggenheim Alpha Opportunity is expected to generate 7.14 times more return on investment than Matthews China. However, Guggenheim Alpha is 7.14 times more volatile than Matthews China Small. It trades about 0.12 of its potential returns per unit of risk. Matthews China Small is currently generating about -0.02 per unit of risk. If you would invest  1,884  in Guggenheim Alpha Opportunity on March 7, 2025 and sell it today you would earn a total of  1,703  from holding Guggenheim Alpha Opportunity or generate 90.39% return on investment over 90 days.

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

Guggenheim Alpha Opportunity  vs.  Matthews China Small

Guggenheim Alpha Opp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guggenheim Alpha Opportunity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Guggenheim Alpha showed solid returns over the last few months and may actually be approaching a breakup point.

Matthews China Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews China Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Matthews China is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guggenheim Alpha and Matthews China

The main advantage of trading using opposite Guggenheim Alpha and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guggenheim Alpha position performs unexpectedly, Matthews China 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 China will offset losses from the drop in Matthews China's long position.

The idea behind Guggenheim Alpha Opportunity and Matthews China 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.