Correlation Between Matthews China and Matthews Asia

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

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

Diversification Opportunities for Matthews China and Matthews Asia

0.51

Correlation Coefficient

Matthews China  Matthews Asia

Very weak diversification

The 3 months correlation between Matthews and Matthews is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Dividend and Matthews Asia Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Growth 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 Dividend are associated (or correlated) with Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Growth has no effect on the direction of Matthews China i.e., Matthews China and Matthews Asia go up and down completely randomly.

Pair Corralation between Matthews China and Matthews Asia

Assuming the 90 days horizon Matthews China Dividend is expected to generate 1.27 times more return on investment than Matthews Asia. However, Matthews China is 1.27 times more volatile than Matthews Asia Growth. It trades about 0.38 of its potential returns per unit of risk. Matthews Asia Growth is currently generating about 0.08 per unit of risk. If you would invest  1,176  in Matthews China Dividend on December 4, 2024 and sell it today you would earn a total of  124.00  from holding Matthews China Dividend or generate 10.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Matthews China Dividend  vs.  Matthews Asia Growth

Matthews China Dividend

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Dividend are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Matthews China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Matthews Asia Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews Asia Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Matthews Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matthews China and Matthews Asia

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

The idea behind Matthews China Dividend and Matthews Asia Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.