Correlation Between Cathay Taiwan and Information Technology
Can any of the company-specific risk be diversified away by investing in both Cathay Taiwan and Information Technology 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 Information Technology 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 Information Technology Total, you can compare the effects of market volatilities on Cathay Taiwan and Information Technology 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 Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Information Technology.
Diversification Opportunities for Cathay Taiwan and Information Technology
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Information is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Information Technology go up and down completely randomly.
Pair Corralation between Cathay Taiwan and Information Technology
Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to under-perform the Information Technology. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Taiwan 5G is 2.22 times less risky than Information Technology. The etf trades about -0.02 of its potential returns per unit of risk. The Information Technology Total is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,765 in Information Technology Total on September 13, 2024 and sell it today you would earn a total of 85.00 from holding Information Technology Total or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Taiwan 5G vs. Information Technology Total
Performance |
| Timeline |
| Cathay Taiwan 5G |
| Information Technology |
Cathay Taiwan and Information Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Taiwan and Information Technology
The main advantage of trading using opposite Cathay Taiwan and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Taiwan position performs unexpectedly, Information Technology 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 Information Technology will offset losses from the drop in Information Technology's long position.| Cathay Taiwan vs. YuantaP shares Taiwan Top | Cathay Taiwan vs. Yuanta Daily Taiwan | Cathay Taiwan vs. Yuanta Daily CSI | Cathay Taiwan vs. Cathay Sustainability High |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |