Correlation Between YuantaP Shares and Cathay SP
Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Cathay SP 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 YuantaP Shares and Cathay SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between YuantaP shares MSCI Taiwan and Cathay SP North, you can compare the effects of market volatilities on YuantaP Shares and Cathay SP 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 YuantaP Shares with a short position of Cathay SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Cathay SP.
Diversification Opportunities for YuantaP Shares and Cathay SP
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between YuantaP and Cathay is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares MSCI Taiwan and Cathay SP North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay SP North and YuantaP Shares 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 YuantaP shares MSCI Taiwan are associated (or correlated) with Cathay SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay SP North has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Cathay SP go up and down completely randomly.
Pair Corralation between YuantaP Shares and Cathay SP
Assuming the 90 days trading horizon YuantaP shares MSCI Taiwan is expected to generate 0.94 times more return on investment than Cathay SP. However, YuantaP shares MSCI Taiwan is 1.06 times less risky than Cathay SP. It trades about 0.1 of its potential returns per unit of risk. Cathay SP North is currently generating about 0.09 per unit of risk. If you would invest 6,330 in YuantaP shares MSCI Taiwan on September 2, 2024 and sell it today you would earn a total of 2,475 from holding YuantaP shares MSCI Taiwan or generate 39.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
YuantaP shares MSCI Taiwan vs. Cathay SP North
Performance |
| Timeline |
| YuantaP shares MSCI |
| Cathay SP North |
YuantaP Shares and Cathay SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with YuantaP Shares and Cathay SP
The main advantage of trading using opposite YuantaP Shares and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares position performs unexpectedly, Cathay SP 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 Cathay SP will offset losses from the drop in Cathay SP's long position.| YuantaP Shares vs. Yuanta Daily CSI | YuantaP Shares vs. Fubon FTSE Vietnam | YuantaP Shares vs. Paradigm SP GSCI |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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