Correlation Between Yuanta Daily and Cathay SP
Can any of the company-specific risk be diversified away by investing in both Yuanta Daily 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 Yuanta Daily and Cathay SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yuanta Daily Taiwan and Cathay SP North, you can compare the effects of market volatilities on Yuanta Daily 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 Yuanta Daily with a short position of Cathay SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta Daily and Cathay SP.
Diversification Opportunities for Yuanta Daily and Cathay SP
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Yuanta and Cathay is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Daily 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 Yuanta Daily 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 Yuanta Daily 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 Yuanta Daily i.e., Yuanta Daily and Cathay SP go up and down completely randomly.
Pair Corralation between Yuanta Daily and Cathay SP
Assuming the 90 days trading horizon Yuanta Daily Taiwan is expected to generate 1.8 times more return on investment than Cathay SP. However, Yuanta Daily is 1.8 times more volatile than Cathay SP North. It trades about 0.09 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 14,130 in Yuanta Daily Taiwan on September 2, 2024 and sell it today you would earn a total of 8,595 from holding Yuanta Daily Taiwan or generate 60.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Yuanta Daily Taiwan vs. Cathay SP North
Performance |
| Timeline |
| Yuanta Daily Taiwan |
| Cathay SP North |
Yuanta Daily and Cathay SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yuanta Daily and Cathay SP
The main advantage of trading using opposite Yuanta Daily and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuanta Daily 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.| Yuanta Daily vs. Yuanta Daily CSI | Yuanta Daily vs. Fubon FTSE Vietnam | Yuanta Daily 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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