Correlation Between Cathay DJIA and Fuh Hwa
Can any of the company-specific risk be diversified away by investing in both Cathay DJIA and Fuh Hwa 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 DJIA and Fuh Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay DJIA Inv and Fuh Hwa Daily, you can compare the effects of market volatilities on Cathay DJIA and Fuh Hwa 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 DJIA with a short position of Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay DJIA and Fuh Hwa.
Diversification Opportunities for Cathay DJIA and Fuh Hwa
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Fuh is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cathay DJIA Inv and Fuh Hwa Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa Daily and Cathay DJIA 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 DJIA Inv are associated (or correlated) with Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa Daily has no effect on the direction of Cathay DJIA i.e., Cathay DJIA and Fuh Hwa go up and down completely randomly.
Pair Corralation between Cathay DJIA and Fuh Hwa
Assuming the 90 days trading horizon Cathay DJIA Inv is expected to under-perform the Fuh Hwa. But the etf apears to be less risky and, when comparing its historical volatility, Cathay DJIA Inv is 1.44 times less risky than Fuh Hwa. The etf trades about -0.27 of its potential returns per unit of risk. The Fuh Hwa Daily is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 728.00 in Fuh Hwa Daily on August 28, 2024 and sell it today you would earn a total of 52.00 from holding Fuh Hwa Daily or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cathay DJIA Inv vs. Fuh Hwa Daily
Performance |
| Timeline |
| Cathay DJIA Inv |
| Fuh Hwa Daily |
Cathay DJIA and Fuh Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay DJIA and Fuh Hwa
The main advantage of trading using opposite Cathay DJIA and Fuh Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay DJIA position performs unexpectedly, Fuh Hwa 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 Fuh Hwa will offset losses from the drop in Fuh Hwa's long position.| Cathay DJIA vs. Cathay TIP TAIEX | Cathay DJIA vs. Cathay Nasdaq AI | Cathay DJIA vs. Cathay Dow Jones | Cathay DJIA vs. Cathay Bloomberg Barclays |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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