Correlation Between Wasatch Emerging and Matthews India

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

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

Diversification Opportunities for Wasatch Emerging and Matthews India

0.93

Correlation Coefficient

Wasatch Emerging  Matthews India

Almost no diversification

The 3 months correlation between Wasatch and Matthews is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Emerging India and Matthews India Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews India and Wasatch Emerging 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 Wasatch Emerging India are associated (or correlated) with Matthews India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews India has no effect on the direction of Wasatch Emerging i.e., Wasatch Emerging and Matthews India go up and down completely randomly.

Pair Corralation between Wasatch Emerging and Matthews India

Assuming the 90 days horizon Wasatch Emerging India is expected to generate 1.17 times more return on investment than Matthews India. However, Wasatch Emerging is 1.17 times more volatile than Matthews India Fund. It trades about -0.03 of its potential returns per unit of risk. Matthews India Fund is currently generating about -0.1 per unit of risk. If you would invest  572.00  in Wasatch Emerging India on December 30, 2024 and sell it today you would lose (14.00) from holding Wasatch Emerging India or give up 2.45% of portfolio value over 90 days.

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

Wasatch Emerging India  vs.  Matthews India Fund

Wasatch Emerging India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wasatch Emerging India has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wasatch Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthews India Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Wasatch Emerging and Matthews India

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

The idea behind Wasatch Emerging India and Matthews India 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.