Correlation Between Driehaus Emerging and Matthews Asia

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

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

Diversification Opportunities for Driehaus Emerging and Matthews Asia

0.45

Correlation Coefficient

Driehaus Emerging  Matthews Asia

Very weak diversification

The 3 months correlation between Driehaus and Matthews is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Emerging Markets and Matthews Asia Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Small and Driehaus Emerging 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 Driehaus Emerging Markets 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 Small has no effect on the direction of Driehaus Emerging i.e., Driehaus Emerging and Matthews Asia go up and down completely randomly.

Pair Corralation between Driehaus Emerging and Matthews Asia

Assuming the 90 days horizon Driehaus Emerging Markets is expected to under-perform the Matthews Asia. But the mutual fund apears to be less risky and, when comparing its historical volatility, Driehaus Emerging Markets is 1.01 times less risky than Matthews Asia. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Matthews Asia Small is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,312  in Matthews Asia Small on December 30, 2024 and sell it today you would lose (28.00) from holding Matthews Asia Small or give up 1.21% of portfolio value over 90 days.

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

Driehaus Emerging Markets  vs.  Matthews Asia Small

Driehaus Emerging Markets

Risk-Adjusted Performance

Very Weak

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

Matthews Asia Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews Asia Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential 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 Driehaus Emerging and Matthews Asia

The main advantage of trading using opposite Driehaus Emerging and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driehaus Emerging 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 Driehaus Emerging Markets and Matthews Asia 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.