Correlation Between Matthews China and Guinness Atkinson

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

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

Diversification Opportunities for Matthews China and Guinness Atkinson

0.96

Correlation Coefficient

Matthews China  Guinness Atkinson

Almost no diversification

The 3 months correlation between Matthews and Guinness is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Guinness Atkinson China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guinness Atkinson China 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 Fund are associated (or correlated) with Guinness Atkinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guinness Atkinson China has no effect on the direction of Matthews China i.e., Matthews China and Guinness Atkinson go up and down completely randomly.

Pair Corralation between Matthews China and Guinness Atkinson

Assuming the 90 days horizon Matthews China Fund is expected to generate 1.33 times more return on investment than Guinness Atkinson. However, Matthews China is 1.33 times more volatile than Guinness Atkinson China. It trades about 0.14 of its potential returns per unit of risk. Guinness Atkinson China is currently generating about 0.14 per unit of risk. If you would invest  1,105  in Matthews China Fund on September 13, 2024 and sell it today you would earn a total of  317.00  from holding Matthews China Fund or generate 28.69% return on investment over 90 days.

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

Matthews China Fund  vs.  Guinness Atkinson China

Matthews China

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Matthews China showed solid returns over the last few months and may actually be approaching a breakup point.

Guinness Atkinson China

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guinness Atkinson China are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Guinness Atkinson showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matthews China and Guinness Atkinson

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

The idea behind Matthews China Fund and Guinness Atkinson China 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.