Correlation Between Taiwan Weighted and Cathay Real
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and Cathay Real 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 Real 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 Real Estate, you can compare the effects of market volatilities on Taiwan Weighted and Cathay Real 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 Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and Cathay Real.
Diversification Opportunities for Taiwan Weighted and Cathay Real
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Taiwan and Cathay is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and Cathay Real go up and down completely randomly.
Pair Corralation between Taiwan Weighted and Cathay Real
Assuming the 90 days trading horizon Taiwan Weighted is expected to generate 1.36 times less return on investment than Cathay Real. But when comparing it to its historical volatility, Taiwan Weighted is 1.96 times less risky than Cathay Real. It trades about 0.09 of its potential returns per unit of risk. Cathay Real Estate is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,525 in Cathay Real Estate on August 30, 2024 and sell it today you would earn a total of 1,005 from holding Cathay Real Estate or generate 65.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.75% |
| Values | Daily Returns |
Taiwan Weighted vs. Cathay Real Estate
Performance |
| Timeline |
Taiwan Weighted and Cathay Real Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Cathay Real Estate
Pair trading matchups for Cathay Real
Pair Trading with Taiwan Weighted and Cathay Real
The main advantage of trading using opposite Taiwan Weighted and Cathay Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, Cathay Real 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 Real will offset losses from the drop in Cathay Real's long position.| Taiwan Weighted vs. V Tac Technology Co | Taiwan Weighted vs. Sesoda Corp | Taiwan Weighted vs. Asmedia Technology | Taiwan Weighted vs. Oceanic Beverages Co |
| Cathay Real vs. Tainan Spinning Co | Cathay Real vs. Carnival Industrial Corp | Cathay Real vs. Symtek Automation Asia | Cathay Real vs. CTCI Corp |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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