Correlation Between Barclays ETN and Matthews China

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

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

Diversification Opportunities for Barclays ETN and Matthews China

0.31

Correlation Coefficient

Barclays ETN  Matthews China

Weak diversification

The 3 months correlation between Barclays and Matthews is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Barclays ETN Select and Matthews China Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Active and Barclays ETN 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 Barclays ETN Select 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 Active has no effect on the direction of Barclays ETN i.e., Barclays ETN and Matthews China go up and down completely randomly.

Pair Corralation between Barclays ETN and Matthews China

Given the investment horizon of 90 days Barclays ETN is expected to generate 1.26 times less return on investment than Matthews China. But when comparing it to its historical volatility, Barclays ETN Select is 1.31 times less risky than Matthews China. It trades about 0.14 of its potential returns per unit of risk. Matthews China Active is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,234  in Matthews China Active on December 21, 2024 and sell it today you would earn a total of  290.00  from holding Matthews China Active or generate 12.98% return on investment over 90 days.

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

Barclays ETN Select  vs.  Matthews China Active

Barclays ETN Select

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays ETN Select are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Barclays ETN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Matthews China Active

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Active are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Matthews China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barclays ETN and Matthews China

The main advantage of trading using opposite Barclays ETN and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays ETN 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 Barclays ETN Select and Matthews China Active 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.