Correlation Between Matthews India and Alps/kotak India

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

By analyzing existing cross correlation between Matthews India Fund and Alpskotak India Growth, you can compare the effects of market volatilities on Matthews India and Alps/kotak India 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 India with a short position of Alps/kotak India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews India and Alps/kotak India.

Diversification Opportunities for Matthews India and Alps/kotak India

0.8

Correlation Coefficient

Matthews India  Alps/kotak India

Very poor diversification

The 3 months correlation between Matthews and Alps/kotak is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Matthews India Fund and Alpskotak India Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpskotak India Growth and Matthews India 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 India Fund are associated (or correlated) with Alps/kotak India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpskotak India Growth has no effect on the direction of Matthews India i.e., Matthews India and Alps/kotak India go up and down completely randomly.

Pair Corralation between Matthews India and Alps/kotak India

Assuming the 90 days horizon Matthews India Fund is expected to generate 1.09 times more return on investment than Alps/kotak India. However, Matthews India is 1.09 times more volatile than Alpskotak India Growth. It trades about -0.24 of its potential returns per unit of risk. Alpskotak India Growth is currently generating about -0.27 per unit of risk. If you would invest  3,116  in Matthews India Fund on October 9, 2024 and sell it today you would lose (476.00) from holding Matthews India Fund or give up 15.28% of portfolio value over 90 days.

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

Matthews India Fund  vs.  Alpskotak India Growth

Matthews India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews India 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 basic 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.

Alpskotak India Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpskotak India Growth 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 forward 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.

Pair Trading with Matthews India and Alps/kotak India

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

The idea behind Matthews India Fund and Alpskotak India 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.