Correlation Between Sinopac TAIEX and Cathay Taiwan
Can any of the company-specific risk be diversified away by investing in both Sinopac TAIEX and Cathay Taiwan 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 Sinopac TAIEX and Cathay Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sinopac TAIEX ETF and Cathay Taiwan 5G, you can compare the effects of market volatilities on Sinopac TAIEX and Cathay Taiwan 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 Sinopac TAIEX with a short position of Cathay Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sinopac TAIEX and Cathay Taiwan.
Diversification Opportunities for Sinopac TAIEX and Cathay Taiwan
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sinopac and Cathay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sinopac TAIEX ETF and Cathay Taiwan 5G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Taiwan 5G and Sinopac TAIEX 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 Sinopac TAIEX ETF are associated (or correlated) with Cathay Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Taiwan 5G has no effect on the direction of Sinopac TAIEX i.e., Sinopac TAIEX and Cathay Taiwan go up and down completely randomly.
Pair Corralation between Sinopac TAIEX and Cathay Taiwan
Assuming the 90 days trading horizon Sinopac TAIEX is expected to generate 1.5 times less return on investment than Cathay Taiwan. But when comparing it to its historical volatility, Sinopac TAIEX ETF is 1.23 times less risky than Cathay Taiwan. It trades about 0.09 of its potential returns per unit of risk. Cathay Taiwan 5G is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,250 in Cathay Taiwan 5G on September 4, 2024 and sell it today you would earn a total of 1,136 from holding Cathay Taiwan 5G or generate 90.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.54% |
| Values | Daily Returns |
Sinopac TAIEX ETF vs. Cathay Taiwan 5G
Performance |
| Timeline |
| Sinopac TAIEX ETF |
| Cathay Taiwan 5G |
Sinopac TAIEX and Cathay Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sinopac TAIEX and Cathay Taiwan
The main advantage of trading using opposite Sinopac TAIEX and Cathay Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopac TAIEX position performs unexpectedly, Cathay Taiwan 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 Taiwan will offset losses from the drop in Cathay Taiwan's long position.| Sinopac TAIEX vs. Cathay Taiwan 5G | Sinopac TAIEX vs. Ruentex Development Co | Sinopac TAIEX vs. Symtek Automation Asia | Sinopac TAIEX vs. CTCI Corp |
| Cathay Taiwan vs. Ruentex Development Co | Cathay Taiwan vs. Symtek Automation Asia | Cathay Taiwan vs. CTCI Corp | Cathay Taiwan vs. Information Technology Total |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |