Correlation Between Matthews Pacific and Strategic Equity

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

By analyzing existing cross correlation between Matthews Pacific Tiger and Strategic Equity Portfolio, you can compare the effects of market volatilities on Matthews Pacific and Strategic Equity 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 Pacific with a short position of Strategic Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthews Pacific and Strategic Equity.

Diversification Opportunities for Matthews Pacific and Strategic Equity

0.08

Correlation Coefficient

Matthews Pacific  Strategic Equity

Significant diversification

The 3 months correlation between Matthews and Strategic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Pacific Tiger and Strategic Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Equity Por and Matthews Pacific 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 Pacific Tiger are associated (or correlated) with Strategic Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Equity Por has no effect on the direction of Matthews Pacific i.e., Matthews Pacific and Strategic Equity go up and down completely randomly.

Pair Corralation between Matthews Pacific and Strategic Equity

Assuming the 90 days horizon Matthews Pacific is expected to generate 2.11 times less return on investment than Strategic Equity. In addition to that, Matthews Pacific is 1.78 times more volatile than Strategic Equity Portfolio. It trades about 0.05 of its total potential returns per unit of risk. Strategic Equity Portfolio is currently generating about 0.18 per unit of volatility. If you would invest  2,920  in Strategic Equity Portfolio on September 3, 2024 and sell it today you would earn a total of  239.00  from holding Strategic Equity Portfolio or generate 8.18% return on investment over 90 days.

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

Matthews Pacific Tiger  vs.  Strategic Equity Portfolio

Matthews Pacific Tiger

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Pacific Tiger are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Strategic Equity Por

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Equity Portfolio are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Strategic Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Matthews Pacific and Strategic Equity

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

The idea behind Matthews Pacific Tiger and Strategic Equity Portfolio 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.