Correlation Between Cathay Taiwan and Capital Tip
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Capital Tip 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 Capital Tip 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 Capital Tip Customized, you can compare the effects of market volatilities on Cathay Taiwan and Capital Tip 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 Capital Tip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Capital Tip.
Diversification Opportunities for Cathay Taiwan and Capital Tip
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cathay and Capital is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Capital Tip Customized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Tip Customized 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 Capital Tip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Tip Customized has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Capital Tip go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Capital Tip
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 1.16 times more return on investment than Capital Tip. However, Cathay Taiwan is 1.16 times more volatile than Capital Tip Customized. It trades about 0.07 of its potential returns per unit of risk. Capital Tip Customized is currently generating about 0.05 per unit of risk. If you would invest 2,024 in Cathay Taiwan 5G on November 7, 2024 and sell it today you would earn a total of 428.00 from holding Cathay Taiwan 5G or generate 21.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.99% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Capital Tip Customized
Performance |
| Timeline |
| Cathay Taiwan 5G |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Capital Tip Customized |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cathay Taiwan and Capital Tip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Capital Tip
The main advantage of trading using opposite Cathay Taiwan and Capital Tip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Capital Tip 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 Capital Tip will offset losses from the drop in Capital Tip's long position.The idea behind Cathay Taiwan 5G and Capital Tip Customized 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.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |