Correlation Between Emerging Growth and Matthews Asia

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

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

Diversification Opportunities for Emerging Growth and Matthews Asia

-0.15

Correlation Coefficient

Emerging Growth  Matthews Asia

Good diversification

The 3 months correlation between Emerging and Matthews is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Emerging Growth Fund and Matthews Asia Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Growth and Emerging Growth 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 Emerging Growth Fund are associated (or correlated) with Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Growth has no effect on the direction of Emerging Growth i.e., Emerging Growth and Matthews Asia go up and down completely randomly.

Pair Corralation between Emerging Growth and Matthews Asia

Assuming the 90 days horizon Emerging Growth Fund is expected to under-perform the Matthews Asia. In addition to that, Emerging Growth is 1.27 times more volatile than Matthews Asia Growth. It trades about -0.11 of its total potential returns per unit of risk. Matthews Asia Growth is currently generating about 0.0 per unit of volatility. If you would invest  2,279  in Matthews Asia Growth on December 30, 2024 and sell it today you would lose (10.00) from holding Matthews Asia Growth or give up 0.44% of portfolio value over 90 days.

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

Emerging Growth Fund  vs.  Matthews Asia Growth

Emerging Growth

Risk-Adjusted Performance

Very Weak

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

Matthews Asia Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Emerging Growth and Matthews Asia

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

The idea behind Emerging Growth Fund and Matthews Asia Growth 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..