Correlation Between Matthews International and Equity Residential

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

By analyzing existing cross correlation between Matthews International and Equity Residential, you can compare the effects of market volatilities on Matthews International and Equity Residential 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 Equity Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews International and Equity Residential.

Diversification Opportunities for Matthews International and Equity Residential

-0.2

Correlation Coefficient

Matthews International  Equity Residential

Good diversification

The 3 months correlation between Matthews and Equity is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Matthews International and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential 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 are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Matthews International i.e., Matthews International and Equity Residential go up and down completely randomly.

Pair Corralation between Matthews International and Equity Residential

Given the investment horizon of 90 days Matthews International is expected to generate 2.58 times more return on investment than Equity Residential. However, Matthews International is 2.58 times more volatile than Equity Residential. It trades about 0.16 of its potential returns per unit of risk. Equity Residential is currently generating about -0.07 per unit of risk. If you would invest  2,202  in Matthews International on October 23, 2024 and sell it today you would earn a total of  895.00  from holding Matthews International or generate 40.64% return on investment over 90 days.

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

Matthews International  vs.  Equity Residential

Matthews International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Matthews International showed solid returns over the last few months and may actually be approaching a breakup point.

Equity Residential

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Matthews International and Equity Residential

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

The idea behind Matthews International and Equity Residential 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.