Correlation Between Cathay Taiwan and Yuanta SP
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Yuanta 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 Taiwan and Yuanta SP 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 Yuanta SP GSCI, you can compare the effects of market volatilities on Cathay Taiwan and Yuanta 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 Taiwan with a short position of Yuanta SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Yuanta SP.
Diversification Opportunities for Cathay Taiwan and Yuanta SP
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Yuanta is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Yuanta SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta SP GSCI 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 Yuanta SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta SP GSCI has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Yuanta SP go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Yuanta SP
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 0.91 times more return on investment than Yuanta SP. However, Cathay Taiwan 5G is 1.1 times less risky than Yuanta SP. It trades about -0.09 of its potential returns per unit of risk. Yuanta SP GSCI is currently generating about -0.14 per unit of risk. If you would invest 2,431 in Cathay Taiwan 5G on September 2, 2024 and sell it today you would lose (52.00) from holding Cathay Taiwan 5G or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Yuanta SP GSCI
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Yuanta SP GSCI |
Cathay Taiwan and Yuanta SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Yuanta SP
The main advantage of trading using opposite Cathay Taiwan and Yuanta SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Yuanta 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 Yuanta SP will offset losses from the drop in Yuanta SP's long position.The idea behind Cathay Taiwan 5G and Yuanta SP GSCI 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.| Yuanta SP vs. Yuanta Daily SP | Yuanta SP vs. Yuanta Securities Investment | Yuanta SP vs. Yuanta Global NexGen | Yuanta SP vs. Yuanta SP GSCI |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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