Correlation Between Sparta Capital and Matthews China

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

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

Diversification Opportunities for Sparta Capital and Matthews China

-0.4

Correlation Coefficient

Sparta Capital  Matthews China

Very good diversification

The 3 months correlation between Sparta and Matthews is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Matthews China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China and Sparta Capital 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 Sparta Capital 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 has no effect on the direction of Sparta Capital i.e., Sparta Capital and Matthews China go up and down completely randomly.

Pair Corralation between Sparta Capital and Matthews China

Assuming the 90 days horizon Sparta Capital is expected to generate 1.07 times less return on investment than Matthews China. In addition to that, Sparta Capital is 11.03 times more volatile than Matthews China Fund. It trades about 0.01 of its total potential returns per unit of risk. Matthews China Fund is currently generating about 0.11 per unit of volatility. If you would invest  1,349  in Matthews China Fund on December 30, 2024 and sell it today you would earn a total of  141.00  from holding Matthews China Fund or generate 10.45% return on investment over 90 days.

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

Sparta Capital  vs.  Matthews China Fund

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sparta Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Matthews China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Matthews China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sparta Capital and Matthews China

The main advantage of trading using opposite Sparta Capital and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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 Sparta Capital and Matthews China Fund 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.