Correlation Between Cathay Nasdaq and Cathay SP
Can any of the company-specific risk be diversified away by investing in both Cathay Nasdaq 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 Cathay Nasdaq and Cathay SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Nasdaq AI and Cathay SP North, you can compare the effects of market volatilities on Cathay Nasdaq 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 Cathay Nasdaq with a short position of Cathay SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Nasdaq and Cathay SP.
Diversification Opportunities for Cathay Nasdaq and Cathay SP
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cathay and Cathay is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Nasdaq AI 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 Cathay Nasdaq 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 Nasdaq AI 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 Cathay Nasdaq i.e., Cathay Nasdaq and Cathay SP go up and down completely randomly.
Pair Corralation between Cathay Nasdaq and Cathay SP
Assuming the 90 days trading horizon Cathay Nasdaq AI is expected to under-perform the Cathay SP. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Nasdaq AI is 1.07 times less risky than Cathay SP. The etf trades about -0.12 of its potential returns per unit of risk. The Cathay SP North is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 5,185 in Cathay SP North on October 7, 2024 and sell it today you would lose (25.00) from holding Cathay SP North or give up 0.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Nasdaq AI vs. Cathay SP North
Performance |
| Timeline |
| Cathay Nasdaq AI |
| Cathay SP North |
Cathay Nasdaq and Cathay SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Nasdaq and Cathay SP
The main advantage of trading using opposite Cathay Nasdaq and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Nasdaq 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.| Cathay Nasdaq vs. Cathay TIP TAIEX | Cathay Nasdaq vs. Cathay Dow Jones | Cathay Nasdaq vs. Cathay Bloomberg Barclays | Cathay Nasdaq vs. Cathay TAIEX Daily |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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