Correlation Between SPDR Portfolio and Matthews Emerging

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

By analyzing existing cross correlation between SPDR Portfolio Emerging and Matthews Emerging Markets, you can compare the effects of market volatilities on SPDR Portfolio and Matthews Emerging 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 SPDR Portfolio with a short position of Matthews Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Portfolio and Matthews Emerging.

Diversification Opportunities for SPDR Portfolio and Matthews Emerging

0.62

Correlation Coefficient

SPDR Portfolio  Matthews Emerging

Poor diversification

The 3 months correlation between SPDR and Matthews is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Emerging and Matthews Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Emerging Markets and SPDR Portfolio 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 SPDR Portfolio Emerging are associated (or correlated) with Matthews Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Emerging Markets has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Matthews Emerging go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Matthews Emerging

Given the investment horizon of 90 days SPDR Portfolio Emerging is expected to under-perform the Matthews Emerging. In addition to that, SPDR Portfolio is 1.06 times more volatile than Matthews Emerging Markets. It trades about -0.18 of its total potential returns per unit of risk. Matthews Emerging Markets is currently generating about -0.19 per unit of volatility. If you would invest  2,588  in Matthews Emerging Markets on August 27, 2024 and sell it today you would lose (90.00) from holding Matthews Emerging Markets or give up 3.48% of portfolio value over 90 days.

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

SPDR Portfolio Emerging  vs.  Matthews Emerging Markets

SPDR Portfolio Emerging

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio Emerging are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, SPDR Portfolio is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Matthews Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Matthews Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR Portfolio and Matthews Emerging

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

The idea behind SPDR Portfolio Emerging and Matthews Emerging Markets 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.