Correlation Between Cathay Taiwan and Fuh Hwa
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Fuh Hwa 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 Fuh Hwa 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 Fuh Hwa Taiwan, you can compare the effects of market volatilities on Cathay Taiwan and Fuh Hwa 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 Fuh Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Fuh Hwa.
Diversification Opportunities for Cathay Taiwan and Fuh Hwa
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Fuh is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Fuh Hwa Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa Taiwan 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 Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa Taiwan has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Fuh Hwa go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Fuh Hwa
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 1.51 times more return on investment than Fuh Hwa. However, Cathay Taiwan is 1.51 times more volatile than Fuh Hwa Taiwan. It trades about 0.11 of its potential returns per unit of risk. Fuh Hwa Taiwan is currently generating about 0.02 per unit of risk. If you would invest 1,618 in Cathay Taiwan 5G on September 4, 2024 and sell it today you would earn a total of 768.00 from holding Cathay Taiwan 5G or generate 47.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.93% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Fuh Hwa Taiwan
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Fuh Hwa Taiwan |
Cathay Taiwan and Fuh Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Fuh Hwa
The main advantage of trading using opposite Cathay Taiwan and Fuh Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Fuh Hwa 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 Fuh Hwa will offset losses from the drop in Fuh Hwa's long position.| Cathay Taiwan vs. Ruentex Development Co | Cathay Taiwan vs. Symtek Automation Asia | Cathay Taiwan vs. CTCI Corp | Cathay Taiwan vs. Information Technology Total |
| Fuh Hwa vs. YuantaP shares Taiwan Top | Fuh Hwa vs. Yuanta Daily Taiwan | Fuh Hwa vs. Cathay Taiwan 5G | Fuh Hwa 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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