Correlation Between Matthews Pacific and Matthews Asia

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

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

Diversification Opportunities for Matthews Pacific and Matthews Asia

0.72

Correlation Coefficient

Matthews Pacific  Matthews Asia

Poor diversification

The 3 months correlation between Matthews and Matthews is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Pacific Tiger and Matthews Asia Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Small and Matthews Pacific 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 Matthews Pacific Tiger 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 Small has no effect on the direction of Matthews Pacific i.e., Matthews Pacific and Matthews Asia go up and down completely randomly.

Pair Corralation between Matthews Pacific and Matthews Asia

Assuming the 90 days horizon Matthews Pacific is expected to generate 5.35 times less return on investment than Matthews Asia. But when comparing it to its historical volatility, Matthews Pacific Tiger is 1.03 times less risky than Matthews Asia. It trades about 0.01 of its potential returns per unit of risk. Matthews Asia Small is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,091  in Matthews Asia Small on September 13, 2024 and sell it today you would earn a total of  425.00  from holding Matthews Asia Small or generate 20.33% return on investment over 90 days.

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

Matthews Pacific Tiger  vs.  Matthews Asia Small

Matthews Pacific Tiger

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Pacific Tiger are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Matthews Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Matthews Asia Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews Asia Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary 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 Matthews Pacific and Matthews Asia

The main advantage of trading using opposite Matthews Pacific and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Pacific 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 Matthews Pacific Tiger and Matthews Asia Small 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.