Correlation Between Matthews China and Royce Quant

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

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

Diversification Opportunities for Matthews China and Royce Quant

0.06

Correlation Coefficient

Matthews China  Royce Quant

Significant diversification

The 3 months correlation between Matthews and Royce is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Matthews China Active and Royce Quant Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Quant Small and Matthews China 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 China Active are associated (or correlated) with Royce Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Quant Small has no effect on the direction of Matthews China i.e., Matthews China and Royce Quant go up and down completely randomly.

Pair Corralation between Matthews China and Royce Quant

Considering the 90-day investment horizon Matthews China Active is expected to generate 1.29 times more return on investment than Royce Quant. However, Matthews China is 1.29 times more volatile than Royce Quant Small Cap. It trades about 0.02 of its potential returns per unit of risk. Royce Quant Small Cap is currently generating about -0.04 per unit of risk. If you would invest  2,818  in Matthews China Active on August 26, 2025 and sell it today you would earn a total of  31.00  from holding Matthews China Active or generate 1.1% return on investment over 90 days.

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

Matthews China Active  vs.  Royce Quant Small Cap

Matthews China Active

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Active are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Matthews China is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Royce Quant Small

Risk-Adjusted Performance

Weakest

Over the last 90 days Royce Quant Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Royce Quant is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Matthews China and Royce Quant

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

The idea behind Matthews China Active and Royce Quant Small Cap 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.