Correlation Between Northern Lights and Matthews China
Can any of the company-specific risk be diversified away by investing in both Northern Lights 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 Northern Lights and Matthews China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Lights and Matthews China Discovery, you can compare the effects of market volatilities on Northern Lights 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 Northern Lights with a short position of Matthews China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Lights and Matthews China.
Diversification Opportunities for Northern Lights and Matthews China
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and Matthews is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Northern Lights 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 Northern Lights 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 Northern Lights 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 Northern Lights i.e., Northern Lights and Matthews China go up and down completely randomly.
Pair Corralation between Northern Lights and Matthews China
Given the investment horizon of 90 days Northern Lights is expected to under-perform the Matthews China. But the etf apears to be less risky and, when comparing its historical volatility, Northern Lights is 1.34 times less risky than Matthews China. The etf trades about -0.11 of its potential returns per unit of risk. The Matthews China Discovery is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 3,384 in Matthews China Discovery on September 12, 2025 and sell it today you would lose (21.00) from holding Matthews China Discovery or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Lights vs. Matthews China Discovery
Performance |
| Timeline |
| Northern Lights |
| Matthews China Discovery |
Northern Lights and Matthews China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Lights and Matthews China
The main advantage of trading using opposite Northern Lights and Matthews China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Lights 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.| Northern Lights vs. VanEck Social Sentiment | Northern Lights vs. The Alger ETF | Northern Lights vs. Cabana Target Leading | Northern Lights vs. TrueShares Structured Outcome |
| Matthews China vs. AdvisorShares Hotel ETF | Matthews China vs. Spinnaker ETF Series | Matthews China vs. Litman Gregory Funds | Matthews China vs. Ocean Park International |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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