Correlation Between Royce Quant and Matthews China

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

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

Diversification Opportunities for Royce Quant and Matthews China

0.04

Correlation Coefficient

Royce Quant  Matthews China

Significant diversification

The 3 months correlation between Royce and Matthews is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Royce Quant Small Cap and Matthews China Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Active and Royce Quant 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 Royce Quant Small Cap are associated (or correlated) with Matthews China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews China Active has no effect on the direction of Royce Quant i.e., Royce Quant and Matthews China go up and down completely randomly.

Pair Corralation between Royce Quant and Matthews China

Given the investment horizon of 90 days Royce Quant Small Cap is expected to under-perform the Matthews China. But the etf apears to be less risky and, when comparing its historical volatility, Royce Quant Small Cap is 1.28 times less risky than Matthews China. The etf trades about -0.01 of its potential returns per unit of risk. The Matthews China Active is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,741  in Matthews China Active on August 17, 2025 and sell it today you would earn a total of  189.00  from holding Matthews China Active or generate 6.9% return on investment over 90 days.

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

Royce Quant Small Cap  vs.  Matthews China Active

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Matthews China Active

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Matthews China Active are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Matthews China may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Pair Trading with Royce Quant and Matthews China

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

The idea behind Royce Quant Small Cap and Matthews China Active 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.