Correlation Between Matthews China and JP Morgan

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

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

Diversification Opportunities for Matthews China and JP Morgan

0.74

Correlation Coefficient

Matthews China  JP Morgan

Poor diversification

The 3 months correlation between Matthews and JIRE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Active and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange and Matthews China 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 China Active are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of Matthews China i.e., Matthews China and JP Morgan go up and down completely randomly.

Pair Corralation between Matthews China and JP Morgan

Considering the 90-day investment horizon Matthews China Active is expected to under-perform the JP Morgan. In addition to that, Matthews China is 1.41 times more volatile than JP Morgan Exchange Traded. It trades about -0.49 of its total potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about -0.35 per unit of volatility. If you would invest  6,314  in JP Morgan Exchange Traded on October 10, 2024 and sell it today you would lose (382.00) from holding JP Morgan Exchange Traded or give up 6.05% of portfolio value over 90 days.

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

Matthews China Active  vs.  JP Morgan Exchange Traded

Matthews China Active

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews China Active has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

JP Morgan Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JP Morgan Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Matthews China and JP Morgan

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

The idea behind Matthews China Active and JP Morgan Exchange Traded 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .