Correlation Between Matthews Asia and JPMorgan BetaBuilders

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

By analyzing existing cross correlation between Matthews Asia Innovators and JPMorgan BetaBuilders Developed, you can compare the effects of market volatilities on Matthews Asia and JPMorgan BetaBuilders 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 Asia with a short position of JPMorgan BetaBuilders. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Asia and JPMorgan BetaBuilders.

Diversification Opportunities for Matthews Asia and JPMorgan BetaBuilders

0.68

Correlation Coefficient

Matthews Asia  JPMorgan BetaBuilders

Poor diversification

The 3 months correlation between Matthews and JPMorgan is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Innovators and JPMorgan BetaBuilders Develope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan BetaBuilders and Matthews Asia 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 Asia Innovators are associated (or correlated) with JPMorgan BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan BetaBuilders has no effect on the direction of Matthews Asia i.e., Matthews Asia and JPMorgan BetaBuilders go up and down completely randomly.

Pair Corralation between Matthews Asia and JPMorgan BetaBuilders

Given the investment horizon of 90 days Matthews Asia Innovators is expected to generate 1.35 times more return on investment than JPMorgan BetaBuilders. However, Matthews Asia is 1.35 times more volatile than JPMorgan BetaBuilders Developed. It trades about -0.01 of its potential returns per unit of risk. JPMorgan BetaBuilders Developed is currently generating about -0.07 per unit of risk. If you would invest  2,838  in Matthews Asia Innovators on December 2, 2024 and sell it today you would lose (31.00) from holding Matthews Asia Innovators or give up 1.09% of portfolio value over 90 days.

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

Matthews Asia Innovators  vs.  JPMorgan BetaBuilders Develope

Matthews Asia Innovators

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews Asia Innovators has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Matthews Asia is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JPMorgan BetaBuilders

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan BetaBuilders Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, JPMorgan BetaBuilders is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Matthews Asia and JPMorgan BetaBuilders

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

The idea behind Matthews Asia Innovators and JPMorgan BetaBuilders Developed 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.