Correlation Between Cathay TIP and Cathay Sustainability
Can any of the company-specific risk be diversified away by investing in both Cathay TIP and Cathay Sustainability 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 TIP and Cathay Sustainability into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay TIP TAIEX and Cathay Sustainability High, you can compare the effects of market volatilities on Cathay TIP and Cathay Sustainability 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 TIP with a short position of Cathay Sustainability. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay TIP and Cathay Sustainability.
Diversification Opportunities for Cathay TIP and Cathay Sustainability
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Cathay is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cathay TIP TAIEX and Cathay Sustainability High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Sustainability and Cathay TIP 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 TIP TAIEX are associated (or correlated) with Cathay Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Sustainability has no effect on the direction of Cathay TIP i.e., Cathay TIP and Cathay Sustainability go up and down completely randomly.
Pair Corralation between Cathay TIP and Cathay Sustainability
Assuming the 90 days trading horizon Cathay TIP TAIEX is expected to generate 0.77 times more return on investment than Cathay Sustainability. However, Cathay TIP TAIEX is 1.3 times less risky than Cathay Sustainability. It trades about 0.15 of its potential returns per unit of risk. Cathay Sustainability High is currently generating about -0.06 per unit of risk. If you would invest 2,916 in Cathay TIP TAIEX on September 5, 2024 and sell it today you would earn a total of 45.00 from holding Cathay TIP TAIEX or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay TIP TAIEX vs. Cathay Sustainability High
Performance |
| Timeline |
| Cathay TIP TAIEX |
| Cathay Sustainability |
Cathay TIP and Cathay Sustainability Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay TIP and Cathay Sustainability
The main advantage of trading using opposite Cathay TIP and Cathay Sustainability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay TIP position performs unexpectedly, Cathay Sustainability 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 Sustainability will offset losses from the drop in Cathay Sustainability's long position.| Cathay TIP vs. Ruentex Development Co | Cathay TIP vs. Symtek Automation Asia | Cathay TIP vs. CTCI Corp | Cathay TIP vs. Information Technology Total |
| Cathay Sustainability vs. Cathay TIP TAIEX | Cathay Sustainability vs. Cathay Nasdaq AI | Cathay Sustainability vs. Cathay Dow Jones | Cathay Sustainability 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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