Correlation Between Matthews Asia and Matthews India

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

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

Diversification Opportunities for Matthews Asia and Matthews India

0.59

Correlation Coefficient

Matthews Asia  Matthews India

Very weak diversification

The 3 months correlation between Matthews and Matthews is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Matthews Asia Innovators and Matthews India Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews India and Matthews Asia 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 Asia Innovators 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 Matthews Asia i.e., Matthews Asia and Matthews India go up and down completely randomly.

Pair Corralation between Matthews Asia and Matthews India

Assuming the 90 days horizon Matthews Asia is expected to generate 1.91 times less return on investment than Matthews India. In addition to that, Matthews Asia is 1.77 times more volatile than Matthews India Fund. It trades about 0.02 of its total potential returns per unit of risk. Matthews India Fund is currently generating about 0.08 per unit of volatility. If you would invest  2,082  in Matthews India Fund on February 1, 2024 and sell it today you would earn a total of  797.00  from holding Matthews India Fund or generate 38.28% return on investment over 90 days.

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

Matthews Asia Innovators  vs.  Matthews India Fund

Matthews Asia Innovators

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Asia Innovators are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Matthews Asia may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Matthews India

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews India Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Matthews India 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 Asia and Matthews India

The main advantage of trading using opposite Matthews Asia and Matthews India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthews Asia 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 Matthews Asia Innovators 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.