Correlation Between Matthews Japan and Emerald Banking

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

By analyzing existing cross correlation between Matthews Japan Fund and Emerald Banking And, you can compare the effects of market volatilities on Matthews Japan and Emerald Banking 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 Japan with a short position of Emerald Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Japan and Emerald Banking.

Diversification Opportunities for Matthews Japan and Emerald Banking

-0.26

Correlation Coefficient

Matthews Japan  Emerald Banking

Very good diversification

The 3 months correlation between Matthews and Emerald is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Japan Fund and Emerald Banking And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Banking And and Matthews Japan 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 Japan Fund are associated (or correlated) with Emerald Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Banking And has no effect on the direction of Matthews Japan i.e., Matthews Japan and Emerald Banking go up and down completely randomly.

Pair Corralation between Matthews Japan and Emerald Banking

Assuming the 90 days horizon Matthews Japan is expected to generate 1.7 times less return on investment than Emerald Banking. But when comparing it to its historical volatility, Matthews Japan Fund is 1.28 times less risky than Emerald Banking. It trades about 0.08 of its potential returns per unit of risk. Emerald Banking And is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,147  in Emerald Banking And on September 14, 2024 and sell it today you would earn a total of  1,053  from holding Emerald Banking And or generate 49.05% return on investment over 90 days.

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

Matthews Japan Fund  vs.  Emerald Banking And

Matthews Japan

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Japan Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Matthews Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerald Banking And

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Banking And are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Emerald Banking showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matthews Japan and Emerald Banking

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

The idea behind Matthews Japan Fund and Emerald Banking And 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.