Correlation Between Cathay Taiwan and Fubon NASDAQ
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Fubon NASDAQ 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 NASDAQ 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 NASDAQ 100 2X, you can compare the effects of market volatilities on Cathay Taiwan and Fubon NASDAQ 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 NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Fubon NASDAQ.
Diversification Opportunities for Cathay Taiwan and Fubon NASDAQ
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Fubon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Fubon NASDAQ 100 2X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NASDAQ 100 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 NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NASDAQ 100 has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Fubon NASDAQ go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Fubon NASDAQ
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to under-perform the Fubon NASDAQ. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Taiwan 5G is 1.59 times less risky than Fubon NASDAQ. The etf trades about -0.14 of its potential returns per unit of risk. The Fubon NASDAQ 100 2X is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 12,440 in Fubon NASDAQ 100 2X on September 3, 2024 and sell it today you would earn a total of 885.00 from holding Fubon NASDAQ 100 2X or generate 7.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Fubon NASDAQ 100 2X
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Fubon NASDAQ 100 |
Cathay Taiwan and Fubon NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Fubon NASDAQ
The main advantage of trading using opposite Cathay Taiwan and Fubon NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Fubon NASDAQ 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 NASDAQ will offset losses from the drop in Fubon NASDAQ's long position.| Cathay Taiwan vs. Cathay TIP TAIEX | Cathay Taiwan vs. Cathay Nasdaq AI | Cathay Taiwan vs. Cathay Dow Jones | Cathay Taiwan vs. Cathay Bloomberg Barclays |
| Fubon NASDAQ vs. Fubon Hang Seng | Fubon NASDAQ vs. Fubon SP Preferred | Fubon NASDAQ vs. Fubon NASDAQ 100 1X | Fubon NASDAQ vs. Fubon TWSE Corporate |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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