Correlation Between Fubon Dow and Cathay SP
Can any of the company-specific risk be diversified away by investing in both Fubon Dow and Cathay SP 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 Dow and Cathay SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fubon Dow Jones and Cathay SP North, you can compare the effects of market volatilities on Fubon Dow and Cathay SP 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 Dow with a short position of Cathay SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon Dow and Cathay SP.
Diversification Opportunities for Fubon Dow and Cathay SP
Very good diversification
The 3 months correlation between Fubon and Cathay is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Dow Jones and Cathay SP North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay SP North and Fubon 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 Fubon Dow Jones are associated (or correlated) with Cathay SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay SP North has no effect on the direction of Fubon Dow i.e., Fubon Dow and Cathay SP go up and down completely randomly.
Pair Corralation between Fubon Dow and Cathay SP
Assuming the 90 days trading horizon Fubon Dow Jones is expected to generate 0.67 times more return on investment than Cathay SP. However, Fubon Dow Jones is 1.49 times less risky than Cathay SP. It trades about 0.31 of its potential returns per unit of risk. Cathay SP North is currently generating about -0.13 per unit of risk. If you would invest 2,317 in Fubon Dow Jones on November 29, 2024 and sell it today you would earn a total of 85.00 from holding Fubon Dow Jones or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fubon Dow Jones vs. Cathay SP North
Performance |
| Timeline |
| Fubon Dow Jones |
| Cathay SP North |
Fubon Dow and Cathay SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fubon Dow and Cathay SP
The main advantage of trading using opposite Fubon Dow and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon Dow position performs unexpectedly, Cathay SP 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 SP will offset losses from the drop in Cathay SP's long position.| Fubon Dow vs. Fubon Hang Seng | Fubon Dow vs. Fubon SP Preferred | Fubon Dow vs. Fubon NASDAQ 100 1X | Fubon Dow vs. Fubon TWSE Corporate |
| Cathay SP vs. Cathay TIP TAIEX | Cathay SP vs. Cathay Nasdaq AI | Cathay SP vs. Cathay Dow Jones | Cathay SP 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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