Correlation Between Matthews China and Aberdeen China

Can any of the company-specific risk be diversified away by investing in both Matthews China and Aberdeen 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 Matthews China and Aberdeen China 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 Aberdeen China Oppty, you can compare the effects of market volatilities on Matthews China and Aberdeen 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 Matthews China with a short position of Aberdeen China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews China and Aberdeen China.

Diversification Opportunities for Matthews China and Aberdeen China

0.96

Correlation Coefficient

Matthews China  Aberdeen China

Almost no diversification

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

Pair Corralation between Matthews China and Aberdeen China

Assuming the 90 days horizon Matthews China Fund is expected to under-perform the Aberdeen China. In addition to that, Matthews China is 1.19 times more volatile than Aberdeen China Oppty. It trades about -0.53 of its total potential returns per unit of risk. Aberdeen China Oppty is currently generating about -0.44 per unit of volatility. If you would invest  2,296  in Aberdeen China Oppty on October 9, 2024 and sell it today you would lose (211.00) from holding Aberdeen China Oppty or give up 9.19% of portfolio value over 90 days.

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

Matthews China Fund  vs.  Aberdeen China Oppty

Matthews China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews China Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Aberdeen China Oppty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen China Oppty has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Matthews China and Aberdeen China

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

The idea behind Matthews China Fund and Aberdeen China Oppty 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.