Correlation Between Fubon FTSE and Cathay SP
Can any of the company-specific risk be diversified away by investing in both Fubon FTSE 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 Fubon FTSE and Cathay SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon FTSE TWSE and Cathay SP North, you can compare the effects of market volatilities on Fubon FTSE 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 Fubon FTSE with a short position of Cathay SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon FTSE and Cathay SP.
Diversification Opportunities for Fubon FTSE and Cathay SP
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fubon and Cathay is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fubon FTSE TWSE 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 Fubon FTSE 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 Fubon FTSE TWSE 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 Fubon FTSE i.e., Fubon FTSE and Cathay SP go up and down completely randomly.
Pair Corralation between Fubon FTSE and Cathay SP
Assuming the 90 days trading horizon Fubon FTSE TWSE is expected to generate 0.96 times more return on investment than Cathay SP. However, Fubon FTSE TWSE is 1.04 times less risky than Cathay SP. It trades about 0.11 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 7,420 in Fubon FTSE TWSE on September 2, 2024 and sell it today you would earn a total of 3,405 from holding Fubon FTSE TWSE or generate 45.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon FTSE TWSE vs. Cathay SP North
Performance |
| Timeline |
| Fubon FTSE TWSE |
| Cathay SP North |
Fubon FTSE and Cathay SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon FTSE and Cathay SP
The main advantage of trading using opposite Fubon FTSE and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon FTSE 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.The idea behind Fubon FTSE TWSE and Cathay SP North 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |