Correlation Between Cathay Taiwan and Fubon SSE180
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Fubon SSE180 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 Taiwan and Fubon SSE180 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Taiwan 5G and Fubon SSE180 Exchange, you can compare the effects of market volatilities on Cathay Taiwan and Fubon SSE180 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 Taiwan with a short position of Fubon SSE180. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Fubon SSE180.
Diversification Opportunities for Cathay Taiwan and Fubon SSE180
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Fubon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Fubon SSE180 Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SSE180 Exchange and Cathay Taiwan 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 Taiwan 5G are associated (or correlated) with Fubon SSE180. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SSE180 Exchange has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Fubon SSE180 go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Fubon SSE180
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 1.26 times more return on investment than Fubon SSE180. However, Cathay Taiwan is 1.26 times more volatile than Fubon SSE180 Exchange. It trades about 0.11 of its potential returns per unit of risk. Fubon SSE180 Exchange is currently generating about 0.01 per unit of risk. If you would invest 1,445 in Cathay Taiwan 5G on August 31, 2024 and sell it today you would earn a total of 934.00 from holding Cathay Taiwan 5G or generate 64.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.36% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Fubon SSE180 Exchange
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Fubon SSE180 Exchange |
Cathay Taiwan and Fubon SSE180 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Fubon SSE180
The main advantage of trading using opposite Cathay Taiwan and Fubon SSE180 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Fubon SSE180 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 Fubon SSE180 will offset losses from the drop in Fubon SSE180's long position.| Cathay Taiwan vs. Yuanta Daily Taiwan | Cathay Taiwan vs. Yuanta Daily CSI | Cathay Taiwan vs. Fubon FTSE Vietnam | Cathay Taiwan vs. Fuh Hwa Emerging |
| Fubon SSE180 vs. Yuanta Daily Taiwan | Fubon SSE180 vs. Cathay Taiwan 5G | Fubon SSE180 vs. Yuanta Daily CSI | Fubon SSE180 vs. Fubon FTSE Vietnam |
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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