Correlation Between Matthews International and Davis Select

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

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

Diversification Opportunities for Matthews International and Davis Select

0.8

Correlation Coefficient

Matthews International  Davis Select

Very poor diversification

The 3 months correlation between Matthews and Davis is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Matthews International Funds and Davis Select International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Select Interna and Matthews International 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 International Funds are associated (or correlated) with Davis Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Select Interna has no effect on the direction of Matthews International i.e., Matthews International and Davis Select go up and down completely randomly.

Pair Corralation between Matthews International and Davis Select

Given the investment horizon of 90 days Matthews International is expected to generate 66.76 times less return on investment than Davis Select. But when comparing it to its historical volatility, Matthews International Funds is 1.11 times less risky than Davis Select. It trades about 0.0 of its potential returns per unit of risk. Davis Select International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,189  in Davis Select International on December 29, 2024 and sell it today you would earn a total of  142.00  from holding Davis Select International or generate 6.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Matthews International Funds  vs.  Davis Select International

Matthews International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews International Funds has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Matthews International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Davis Select Interna

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Select International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Davis Select may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Matthews International and Davis Select

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

The idea behind Matthews International Funds and Davis Select International 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.