Correlation Between Cathay TAIEX and Fubon NASDAQ
Can any of the company-specific risk be diversified away by investing in both Cathay TAIEX and Fubon NASDAQ 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 Cathay TAIEX and Fubon NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay TAIEX Daily and Fubon NASDAQ 100 2X, you can compare the effects of market volatilities on Cathay TAIEX and Fubon NASDAQ 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 Cathay TAIEX with a short position of Fubon NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay TAIEX and Fubon NASDAQ.
Diversification Opportunities for Cathay TAIEX and Fubon NASDAQ
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Fubon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cathay TAIEX Daily and Fubon NASDAQ 100 2X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NASDAQ 100 and Cathay 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 Cathay TAIEX Daily are associated (or correlated) with Fubon NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NASDAQ 100 has no effect on the direction of Cathay TAIEX i.e., Cathay TAIEX and Fubon NASDAQ go up and down completely randomly.
Pair Corralation between Cathay TAIEX and Fubon NASDAQ
Assuming the 90 days trading horizon Cathay TAIEX Daily is expected to under-perform the Fubon NASDAQ. But the etf apears to be less risky and, when comparing its historical volatility, Cathay TAIEX Daily is 1.69 times less risky than Fubon NASDAQ. The etf trades about -0.09 of its potential returns per unit of risk. The Fubon NASDAQ 100 2X is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 9,065 in Fubon NASDAQ 100 2X on September 3, 2024 and sell it today you would earn a total of 4,260 from holding Fubon NASDAQ 100 2X or generate 46.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay TAIEX Daily vs. Fubon NASDAQ 100 2X
Performance |
| Timeline |
| Cathay TAIEX Daily |
| Fubon NASDAQ 100 |
Cathay TAIEX and Fubon NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay TAIEX and Fubon NASDAQ
The main advantage of trading using opposite Cathay TAIEX and Fubon NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay TAIEX position performs unexpectedly, Fubon NASDAQ 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 Fubon NASDAQ will offset losses from the drop in Fubon NASDAQ's long position.| Cathay TAIEX vs. Cathay Taiwan 5G | Cathay TAIEX vs. Ruentex Development Co | Cathay TAIEX vs. Symtek Automation Asia | Cathay TAIEX vs. CTCI Corp |
| Fubon NASDAQ vs. Fubon Hang Seng | Fubon NASDAQ vs. Fubon SP Preferred | Fubon NASDAQ vs. Fubon NASDAQ 100 1X | Fubon NASDAQ vs. Fubon TWSE Corporate |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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