Correlation Between Cathay Sustainability and Yuanta Daily
Can any of the company-specific risk be diversified away by investing in both Cathay Sustainability and Yuanta Daily 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 Sustainability and Yuanta Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Sustainability High and Yuanta Daily SP, you can compare the effects of market volatilities on Cathay Sustainability and Yuanta Daily 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 Sustainability with a short position of Yuanta Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Sustainability and Yuanta Daily.
Diversification Opportunities for Cathay Sustainability and Yuanta Daily
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Yuanta is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High and Yuanta Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Daily SP and Cathay Sustainability 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 Sustainability High are associated (or correlated) with Yuanta Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Daily SP has no effect on the direction of Cathay Sustainability i.e., Cathay Sustainability and Yuanta Daily go up and down completely randomly.
Pair Corralation between Cathay Sustainability and Yuanta Daily
Assuming the 90 days trading horizon Cathay Sustainability High is expected to under-perform the Yuanta Daily. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Sustainability High is 1.9 times less risky than Yuanta Daily. The etf trades about -0.09 of its potential returns per unit of risk. The Yuanta Daily SP is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 9,725 in Yuanta Daily SP on August 28, 2024 and sell it today you would earn a total of 535.00 from holding Yuanta Daily SP or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Sustainability High vs. Yuanta Daily SP
Performance |
| Timeline |
| Cathay Sustainability |
| Yuanta Daily SP |
Cathay Sustainability and Yuanta Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Sustainability and Yuanta Daily
The main advantage of trading using opposite Cathay Sustainability and Yuanta Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Sustainability position performs unexpectedly, Yuanta Daily 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 Yuanta Daily will offset losses from the drop in Yuanta Daily's long position.The idea behind Cathay Sustainability High and Yuanta Daily SP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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