Correlation Between Small Cap and Matthews Pacific

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

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

Diversification Opportunities for Small Cap and Matthews Pacific

-0.39

Correlation Coefficient

Small Cap  Matthews Pacific

Very good diversification

The 3 months correlation between Small and Matthews is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Matthews Pacific Tiger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Pacific Tiger and Small Cap 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 Small Cap Equity are associated (or correlated) with Matthews Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Pacific Tiger has no effect on the direction of Small Cap i.e., Small Cap and Matthews Pacific go up and down completely randomly.

Pair Corralation between Small Cap and Matthews Pacific

Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Matthews Pacific. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Equity is 1.07 times less risky than Matthews Pacific. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Matthews Pacific Tiger is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,797  in Matthews Pacific Tiger on December 22, 2024 and sell it today you would earn a total of  14.00  from holding Matthews Pacific Tiger or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Small Cap Equity  vs.  Matthews Pacific Tiger

Small Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Matthews Pacific Tiger

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Pacific Tiger are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Matthews Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Matthews Pacific

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

The idea behind Small Cap Equity and Matthews Pacific Tiger 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.