Correlation Between EA Series and Matthews China

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

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

Diversification Opportunities for EA Series and Matthews China

0.87

Correlation Coefficient

EA Series  Matthews China

Very poor diversification

The 3 months correlation between MDLV and Matthews is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Matthews China Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Discovery and EA Series 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 EA Series Trust are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Discovery has no effect on the direction of EA Series i.e., EA Series and Matthews China go up and down completely randomly.

Pair Corralation between EA Series and Matthews China

Given the investment horizon of 90 days EA Series is expected to generate 1.92 times less return on investment than Matthews China. But when comparing it to its historical volatility, EA Series Trust is 2.07 times less risky than Matthews China. It trades about 0.12 of its potential returns per unit of risk. Matthews China Discovery is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,574  in Matthews China Discovery on December 29, 2024 and sell it today you would earn a total of  243.00  from holding Matthews China Discovery or generate 9.44% return on investment over 90 days.

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

EA Series Trust  vs.  Matthews China Discovery

EA Series Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable essential indicators, EA Series is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Matthews China Discovery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Discovery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, Matthews China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EA Series and Matthews China

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

The idea behind EA Series Trust and Matthews China Discovery 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.