Correlation Between State Street and Matthews Asia

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

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

Diversification Opportunities for State Street and Matthews Asia

0.18

Correlation Coefficient

State Street  Matthews Asia

Average diversification

The 3 months correlation between State and Matthews is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding State Street Institutional 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 State Street 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 State Street Institutional 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 State Street i.e., State Street and Matthews Asia go up and down completely randomly.

Pair Corralation between State Street and Matthews Asia

Assuming the 90 days horizon State Street Institutional is expected to under-perform the Matthews Asia. In addition to that, State Street is 1.2 times more volatile than Matthews Asia Small. It trades about -0.02 of its total potential returns per unit of risk. Matthews Asia Small is currently generating about 0.05 per unit of volatility. If you would invest  2,626  in Matthews Asia Small on August 15, 2025 and sell it today you would earn a total of  70.00  from holding Matthews Asia Small or generate 2.67% return on investment over 90 days.

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

State Street Institutional  vs.  Matthews Asia Small

State Street Institu

Risk-Adjusted Performance

Weakest

Over the last 90 days State Street Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, State Street 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

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews Asia Small are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential 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 State Street and Matthews Asia

The main advantage of trading using opposite State Street and Matthews Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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 State Street Institutional 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.