Correlation Between Matthews Asia and Portfolio

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

By analyzing existing cross correlation between Matthews Asia Dividend and Portfolio 21 Global, you can compare the effects of market volatilities on Matthews Asia and Portfolio 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 Asia with a short position of Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and Portfolio.

Diversification Opportunities for Matthews Asia and Portfolio

0.71

Correlation Coefficient

Matthews Asia  Portfolio

Poor diversification

The 3 months correlation between Matthews and Portfolio is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Dividend and Portfolio 21 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portfolio 21 Global and Matthews Asia 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 Asia Dividend are associated (or correlated) with Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portfolio 21 Global has no effect on the direction of Matthews Asia i.e., Matthews Asia and Portfolio go up and down completely randomly.

Pair Corralation between Matthews Asia and Portfolio

Assuming the 90 days horizon Matthews Asia Dividend is expected to generate 0.36 times more return on investment than Portfolio. However, Matthews Asia Dividend is 2.78 times less risky than Portfolio. It trades about -0.39 of its potential returns per unit of risk. Portfolio 21 Global is currently generating about -0.32 per unit of risk. If you would invest  1,499  in Matthews Asia Dividend on October 10, 2024 and sell it today you would lose (98.00) from holding Matthews Asia Dividend or give up 6.54% of portfolio value over 90 days.

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

Matthews Asia Dividend  vs.  Portfolio 21 Global

Matthews Asia Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Portfolio 21 Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portfolio 21 Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Matthews Asia and Portfolio

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

The idea behind Matthews Asia Dividend and Portfolio 21 Global 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.