Correlation Between Cathay Taiwan and Fubon SP
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Fubon 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 Fubon 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 Fubon SP Preferred, you can compare the effects of market volatilities on Cathay Taiwan and Fubon 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 Fubon SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Fubon SP.
Diversification Opportunities for Cathay Taiwan and Fubon SP
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Fubon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Fubon SP go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Fubon SP
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to under-perform the Fubon SP. In addition to that, Cathay Taiwan is 1.83 times more volatile than Fubon SP Preferred. It trades about -0.14 of its total potential returns per unit of risk. Fubon SP Preferred is currently generating about 0.18 per unit of volatility. If you would invest 1,602 in Fubon SP Preferred on September 3, 2024 and sell it today you would earn a total of 35.00 from holding Fubon SP Preferred or generate 2.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Fubon SP Preferred
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Fubon SP Preferred |
Cathay Taiwan and Fubon SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Fubon SP
The main advantage of trading using opposite Cathay Taiwan and Fubon SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Fubon 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 Fubon SP will offset losses from the drop in Fubon SP'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 SP vs. Cathay Taiwan 5G | Fubon SP vs. Ruentex Development Co | Fubon SP vs. Symtek Automation Asia | Fubon SP vs. CTCI Corp |
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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