Correlation Between WisdomTree China and Matthews China
Can any of the company-specific risk be diversified away by investing in both WisdomTree China 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 WisdomTree China and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree China ex State Owned and Matthews China Discovery, you can compare the effects of market volatilities on WisdomTree China 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 WisdomTree China with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and Matthews China.
Diversification Opportunities for WisdomTree China and Matthews China
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and Matthews is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and Matthews China Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews China Discovery and WisdomTree 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 WisdomTree China ex State Owned 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 Discovery has no effect on the direction of WisdomTree China i.e., WisdomTree China and Matthews China go up and down completely randomly.
Pair Corralation between WisdomTree China and Matthews China
Given the investment horizon of 90 days WisdomTree China is expected to generate 1.04 times less return on investment than Matthews China. In addition to that, WisdomTree China is 1.17 times more volatile than Matthews China Discovery. It trades about 0.12 of its total potential returns per unit of risk. Matthews China Discovery is currently generating about 0.14 per unit of volatility. If you would invest 2,684 in Matthews China Discovery on March 30, 2025 and sell it today you would earn a total of 190.00 from holding Matthews China Discovery or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. Matthews China Discovery
Performance |
| Timeline |
| WisdomTree China |
| Matthews China Discovery |
WisdomTree China and Matthews China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and Matthews China
The main advantage of trading using opposite WisdomTree China and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China 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.| WisdomTree China vs. Global X MSCI | WisdomTree China vs. WisdomTree Emerging Markets | WisdomTree China vs. Invesco China Technology | WisdomTree China vs. iShares MSCI China |
| Matthews China vs. FT Vest Equity | Matthews China vs. Northern Lights | Matthews China vs. Dimensional International High | Matthews China vs. JPMorgan Fundamental Data |
Check out your portfolio center.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.
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