Correlation Between Cathay Dow and Cathay TIP
Can any of the company-specific risk be diversified away by investing in both Cathay Dow and Cathay TIP 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 Dow and Cathay TIP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Dow Jones and Cathay TIP TAIEX, you can compare the effects of market volatilities on Cathay Dow and Cathay TIP 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 Dow with a short position of Cathay TIP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Dow and Cathay TIP.
Diversification Opportunities for Cathay Dow and Cathay TIP
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Cathay is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Dow Jones and Cathay TIP TAIEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay TIP TAIEX and Cathay Dow 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 Dow Jones are associated (or correlated) with Cathay TIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay TIP TAIEX has no effect on the direction of Cathay Dow i.e., Cathay Dow and Cathay TIP go up and down completely randomly.
Pair Corralation between Cathay Dow and Cathay TIP
Assuming the 90 days trading horizon Cathay Dow Jones is expected to under-perform the Cathay TIP. In addition to that, Cathay Dow is 1.73 times more volatile than Cathay TIP TAIEX. It trades about -0.17 of its total potential returns per unit of risk. Cathay TIP TAIEX is currently generating about 0.51 per unit of volatility. If you would invest 2,719 in Cathay TIP TAIEX on November 29, 2024 and sell it today you would earn a total of 93.00 from holding Cathay TIP TAIEX or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Dow Jones vs. Cathay TIP TAIEX
Performance |
| Timeline |
| Cathay Dow Jones |
| Cathay TIP TAIEX |
Cathay Dow and Cathay TIP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Dow and Cathay TIP
The main advantage of trading using opposite Cathay Dow and Cathay TIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Dow position performs unexpectedly, Cathay TIP 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 TIP will offset losses from the drop in Cathay TIP's long position.| Cathay Dow vs. Cathay TIP TAIEX | Cathay Dow vs. Cathay Nasdaq AI | Cathay Dow vs. Cathay Bloomberg Barclays | Cathay Dow vs. Cathay TAIEX Daily |
| Cathay TIP vs. Cathay Nasdaq AI | Cathay TIP vs. Cathay Dow Jones | Cathay TIP vs. Cathay Bloomberg Barclays | Cathay TIP vs. Cathay TAIEX Daily |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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