Correlation Between Matthews Pacific and Large Cap

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

Diversification Opportunities for Matthews Pacific and Large Cap

0.72

Correlation Coefficient

Matthews Pacific  Large Cap

Poor diversification

The 3 months correlation between Matthews and Large is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Pacific Tiger and Large Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap E 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 Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap E has no effect on the direction of Matthews Pacific i.e., Matthews Pacific and Large Cap go up and down completely randomly.

Pair Corralation between Matthews Pacific and Large Cap

Assuming the 90 days horizon Matthews Pacific Tiger is expected to under-perform the Large Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Matthews Pacific Tiger is 1.69 times less risky than Large Cap. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Large Cap E is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,497  in Large Cap E on October 7, 2024 and sell it today you would lose (443.00) from holding Large Cap E or give up 17.74% of portfolio value over 90 days.

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

Matthews Pacific Tiger  vs.  Large Cap E

Matthews Pacific Tiger

Risk-Adjusted Performance

0 of 100

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 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.

Large Cap E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Large Cap E 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.

Pair Trading with Matthews Pacific and Large Cap

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

The idea behind Matthews Pacific Tiger and Large Cap E 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.