Correlation Between Ruentex Development and Cathay Taiwan
Can any of the company-specific risk be diversified away by investing in both Ruentex Development and Cathay Taiwan 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 Ruentex Development and Cathay Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ruentex Development Co and Cathay Taiwan 5G, you can compare the effects of market volatilities on Ruentex Development and Cathay Taiwan 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 Ruentex Development with a short position of Cathay Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ruentex Development and Cathay Taiwan.
Diversification Opportunities for Ruentex Development and Cathay Taiwan
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ruentex and Cathay is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Cathay Taiwan 5G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Taiwan 5G and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Cathay Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Taiwan 5G has no effect on the direction of Ruentex Development i.e., Ruentex Development and Cathay Taiwan go up and down completely randomly.
Pair Corralation between Ruentex Development and Cathay Taiwan
Assuming the 90 days trading horizon Ruentex Development Co is expected to under-perform the Cathay Taiwan. But the stock apears to be less risky and, when comparing its historical volatility, Ruentex Development Co is 1.08 times less risky than Cathay Taiwan. The stock trades about -0.22 of its potential returns per unit of risk. The Cathay Taiwan 5G is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 2,531 in Cathay Taiwan 5G on September 12, 2024 and sell it today you would lose (62.00) from holding Cathay Taiwan 5G or give up 2.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ruentex Development Co vs. Cathay Taiwan 5G
Performance |
| Timeline |
| Ruentex Development |
| Cathay Taiwan 5G |
Ruentex Development and Cathay Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ruentex Development and Cathay Taiwan
The main advantage of trading using opposite Ruentex Development and Cathay Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ruentex Development position performs unexpectedly, Cathay Taiwan 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 Taiwan will offset losses from the drop in Cathay Taiwan's long position.| Ruentex Development vs. Chong Hong Construction | Ruentex Development vs. Symtek Automation Asia | Ruentex Development vs. WiseChip Semiconductor | Ruentex Development vs. Novatek Microelectronics Corp |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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