Correlation Between Matthews China and Oberweis China

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

Diversification Opportunities for Matthews China and Oberweis China

0.86

Correlation Coefficient

Matthews China  Oberweis China

Very poor diversification

The 3 months correlation between Matthews and Oberweis is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Fund and Oberweis China Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis China Oppor 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 Oberweis China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis China Oppor has no effect on the direction of Matthews China i.e., Matthews China and Oberweis China go up and down completely randomly.

Pair Corralation between Matthews China and Oberweis China

Assuming the 90 days horizon Matthews China is expected to generate 1.16 times less return on investment than Oberweis China. But when comparing it to its historical volatility, Matthews China Fund is 1.1 times less risky than Oberweis China. It trades about 0.11 of its potential returns per unit of risk. Oberweis China Opportunities is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Oberweis China Opportunities on December 2, 2024 and sell it today you would earn a total of  92.00  from holding Oberweis China Opportunities or generate 13.14% return on investment over 90 days.

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

Matthews China Fund  vs.  Oberweis China Opportunities

Matthews China

Risk-Adjusted Performance

OK

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

Oberweis China Oppor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oberweis China Opportunities are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Oberweis China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matthews China and Oberweis China

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

The idea behind Matthews China Fund and Oberweis China Opportunities 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.