Correlation Between Fubon TWSE and Cathay TAIEX
Can any of the company-specific risk be diversified away by investing in both Fubon TWSE and Cathay TAIEX 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 TWSE and Cathay TAIEX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon TWSE Corporate and Cathay TAIEX Daily, you can compare the effects of market volatilities on Fubon TWSE and Cathay TAIEX 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 TWSE with a short position of Cathay TAIEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon TWSE and Cathay TAIEX.
Diversification Opportunities for Fubon TWSE and Cathay TAIEX
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Fubon and Cathay is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Cathay TAIEX Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay TAIEX Daily and Fubon TWSE 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 TWSE Corporate are associated (or correlated) with Cathay TAIEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay TAIEX Daily has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Cathay TAIEX go up and down completely randomly.
Pair Corralation between Fubon TWSE and Cathay TAIEX
Assuming the 90 days trading horizon Fubon TWSE Corporate is expected to generate 0.98 times more return on investment than Cathay TAIEX. However, Fubon TWSE Corporate is 1.02 times less risky than Cathay TAIEX. It trades about 0.18 of its potential returns per unit of risk. Cathay TAIEX Daily is currently generating about -0.3 per unit of risk. If you would invest 4,460 in Fubon TWSE Corporate on November 27, 2024 and sell it today you would earn a total of 89.00 from holding Fubon TWSE Corporate or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon TWSE Corporate vs. Cathay TAIEX Daily
Performance |
| Timeline |
| Fubon TWSE Corporate |
| Cathay TAIEX Daily |
Fubon TWSE and Cathay TAIEX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon TWSE and Cathay TAIEX
The main advantage of trading using opposite Fubon TWSE and Cathay TAIEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon TWSE position performs unexpectedly, Cathay TAIEX 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 TAIEX will offset losses from the drop in Cathay TAIEX's long position.| Fubon TWSE vs. Fubon Hang Seng | Fubon TWSE vs. Fubon SP Preferred | Fubon TWSE vs. Fubon NASDAQ 100 1X | Fubon TWSE vs. Fubon Dow Jones |
| Cathay TAIEX vs. Cathay TIP TAIEX | Cathay TAIEX vs. Cathay Nasdaq AI | Cathay TAIEX vs. Cathay Dow Jones | Cathay TAIEX 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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