Correlation Between Matthews India and Matthews Pacific

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

Diversification Opportunities for Matthews India and Matthews Pacific

0.85

Correlation Coefficient

Matthews India  Matthews Pacific

Very poor diversification

The 3 months correlation between Matthews and Matthews is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Matthews India Fund and Matthews Pacific Tiger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Pacific Tiger 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 Matthews Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Pacific Tiger has no effect on the direction of Matthews India i.e., Matthews India and Matthews Pacific go up and down completely randomly.

Pair Corralation between Matthews India and Matthews Pacific

Assuming the 90 days horizon Matthews India Fund is expected to under-perform the Matthews Pacific. In addition to that, Matthews India is 1.67 times more volatile than Matthews Pacific Tiger. It trades about -0.21 of its total potential returns per unit of risk. Matthews Pacific Tiger is currently generating about -0.06 per unit of volatility. If you would invest  1,893  in Matthews Pacific Tiger on November 28, 2024 and sell it today you would lose (91.00) from holding Matthews Pacific Tiger or give up 4.81% 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.  Matthews Pacific Tiger

Matthews India

Risk-Adjusted Performance

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 fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Matthews Pacific Tiger

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews Pacific Tiger has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Matthews Pacific 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 India and Matthews Pacific

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

The idea behind Matthews India Fund and Matthews Pacific Tiger 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.