Correlation Between ETRACS Quarterly and Matthews China

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

By analyzing existing cross correlation between ETRACS Quarterly Pay and Matthews China Active, you can compare the effects of market volatilities on ETRACS Quarterly and Matthews China 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 ETRACS Quarterly with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Quarterly and Matthews China.

Diversification Opportunities for ETRACS Quarterly and Matthews China

0.56

Correlation Coefficient

ETRACS Quarterly  Matthews China

Very weak diversification

The 3 months correlation between ETRACS and Matthews is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay and Matthews China Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Active and ETRACS Quarterly 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 ETRACS Quarterly Pay are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Active has no effect on the direction of ETRACS Quarterly i.e., ETRACS Quarterly and Matthews China go up and down completely randomly.

Pair Corralation between ETRACS Quarterly and Matthews China

Given the investment horizon of 90 days ETRACS Quarterly Pay is expected to generate 1.03 times more return on investment than Matthews China. However, ETRACS Quarterly is 1.03 times more volatile than Matthews China Active. It trades about 0.21 of its potential returns per unit of risk. Matthews China Active is currently generating about 0.17 per unit of risk. If you would invest  5,683  in ETRACS Quarterly Pay on December 20, 2024 and sell it today you would earn a total of  1,248  from holding ETRACS Quarterly Pay or generate 21.96% return on investment over 90 days.

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

ETRACS Quarterly Pay  vs.  Matthews China Active

ETRACS Quarterly Pay

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Quarterly Pay are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ETRACS Quarterly reported solid returns over the last few months and may actually be approaching a breakup point.

Matthews China Active

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Active are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Matthews China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETRACS Quarterly and Matthews China

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

The idea behind ETRACS Quarterly Pay and Matthews China Active 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.