Correlation Between Taiwan Weighted and Cathay Dow
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Cathay Dow 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 Taiwan Weighted and Cathay Dow into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and Cathay Dow Jones, you can compare the effects of market volatilities on Taiwan Weighted and Cathay Dow 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 Taiwan Weighted with a short position of Cathay Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Cathay Dow.
Diversification Opportunities for Taiwan Weighted and Cathay Dow
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Taiwan and Cathay is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Cathay Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Dow Jones and Taiwan Weighted 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 Taiwan Weighted are associated (or correlated) with Cathay Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Dow Jones has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Cathay Dow go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Cathay Dow
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the Cathay Dow. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.03 times less risky than Cathay Dow. The index trades about -0.11 of its potential returns per unit of risk. The Cathay Dow Jones is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,534 in Cathay Dow Jones on August 31, 2024 and sell it today you would earn a total of 91.00 from holding Cathay Dow Jones or generate 5.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Taiwan Weighted vs. Cathay Dow Jones
Performance |
| Timeline |
Taiwan Weighted and Cathay Dow Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Cathay Dow Jones
Pair trading matchups for Cathay Dow
Pair Trading with Taiwan Weighted and Cathay Dow
The main advantage of trading using opposite Taiwan Weighted and Cathay Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Cathay Dow 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 Dow will offset losses from the drop in Cathay Dow's long position.| Taiwan Weighted vs. Level Biotechnology | Taiwan Weighted vs. Hsin Kuang Steel | Taiwan Weighted vs. China Steel Corp | Taiwan Weighted vs. Sunmax Biotechnology Co |
| Cathay Dow vs. Cathay TIP TAIEX | Cathay Dow vs. Cathay Nasdaq AI | Cathay Dow vs. Cathay Bloomberg Barclays | Cathay Dow vs. Cathay TAIEX Daily |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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