Correlation Between Vanguard Institutional and Matthews Asia

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

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

Diversification Opportunities for Vanguard Institutional and Matthews Asia

0.81

Correlation Coefficient

Vanguard Institutional  Matthews Asia

Very poor diversification

The 3 months correlation between Vanguard and Matthews is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Institutional Index 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 Vanguard Institutional 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 Institutional Index 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 Vanguard Institutional i.e., Vanguard Institutional and Matthews Asia go up and down completely randomly.

Pair Corralation between Vanguard Institutional and Matthews Asia

Assuming the 90 days horizon Vanguard Institutional Index is expected to under-perform the Matthews Asia. In addition to that, Vanguard Institutional is 1.08 times more volatile than Matthews Asia Innovators. It trades about -0.03 of its total potential returns per unit of risk. Matthews Asia Innovators is currently generating about 0.04 per unit of volatility. If you would invest  1,314  in Matthews Asia Innovators on February 3, 2025 and sell it today you would earn a total of  54.00  from holding Matthews Asia Innovators or generate 4.11% return on investment over 90 days.

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

Vanguard Institutional Index  vs.  Matthews Asia Innovators

Vanguard Institutional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Institutional Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Vanguard Institutional 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

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 Vanguard Institutional and Matthews Asia

The main advantage of trading using opposite Vanguard Institutional and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Institutional 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 Vanguard Institutional Index 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.