Correlation Between Vanguard Mid and Matthews China

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

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

Diversification Opportunities for Vanguard Mid and Matthews China

-0.37

Correlation Coefficient

Vanguard Mid  Matthews China

Very good diversification

The 3 months correlation between Vanguard and Matthews is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Matthews China Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Discovery and Vanguard Mid 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 Vanguard Mid Cap Index 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 Discovery has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Matthews China go up and down completely randomly.

Pair Corralation between Vanguard Mid and Matthews China

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to under-perform the Matthews China. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Mid Cap Index is 1.61 times less risky than Matthews China. The etf trades about -0.03 of its potential returns per unit of risk. The Matthews China Discovery is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,587  in Matthews China Discovery on December 21, 2024 and sell it today you would earn a total of  288.00  from holding Matthews China Discovery or generate 11.13% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Matthews China Discovery

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Matthews China Discovery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Discovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Matthews China may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Mid and Matthews China

The main advantage of trading using opposite Vanguard Mid and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Vanguard Mid Cap Index and Matthews China Discovery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.