Correlation Between Cathay Taiwan and Cathay Global
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Cathay Global 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 Cathay Global 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 Cathay Global Autonomous, you can compare the effects of market volatilities on Cathay Taiwan and Cathay Global 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 Cathay Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Cathay Global.
Diversification Opportunities for Cathay Taiwan and Cathay Global
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Cathay is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Cathay Global Autonomous in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Global Autonomous 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 Cathay Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Global Autonomous has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Cathay Global go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Cathay Global
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to under-perform the Cathay Global. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Taiwan 5G is 1.58 times less risky than Cathay Global. The etf trades about -0.09 of its potential returns per unit of risk. The Cathay Global Autonomous is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,387 in Cathay Global Autonomous on August 31, 2024 and sell it today you would earn a total of 36.00 from holding Cathay Global Autonomous or generate 1.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Cathay Global Autonomous
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Cathay Global Autonomous |
Cathay Taiwan and Cathay Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Cathay Global
The main advantage of trading using opposite Cathay Taiwan and Cathay Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Cathay Global 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 Cathay Global will offset losses from the drop in Cathay Global's long position.| Cathay Taiwan vs. Yuanta Daily Taiwan | Cathay Taiwan vs. Yuanta Daily CSI | Cathay Taiwan vs. Cathay Sustainability High | Cathay Taiwan vs. Fubon FTSE Vietnam |
| Cathay Global vs. YuantaP shares Taiwan Top | Cathay Global vs. Yuanta Daily Taiwan | Cathay Global vs. Cathay Taiwan 5G | Cathay Global vs. Yuanta Daily CSI |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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