Correlation Between YuantaP Shares and Capital ICE

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and Capital ICE 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 YuantaP Shares and Capital ICE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YuantaP shares Taiwan Top and Capital ICE 15, you can compare the effects of market volatilities on YuantaP Shares and Capital ICE 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 YuantaP Shares with a short position of Capital ICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Capital ICE.

Diversification Opportunities for YuantaP Shares and Capital ICE

-0.48

Correlation Coefficient

YuantaP Shares  Capital ICE

Very good diversification

The 3 months correlation between YuantaP and Capital is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Top and Capital ICE 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital ICE 15 and YuantaP Shares 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 YuantaP shares Taiwan Top are associated (or correlated) with Capital ICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital ICE 15 has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Capital ICE go up and down completely randomly.

Pair Corralation between YuantaP Shares and Capital ICE

Assuming the 90 days trading horizon YuantaP shares Taiwan Top is expected to under-perform the Capital ICE. In addition to that, YuantaP Shares is 1.76 times more volatile than Capital ICE 15. It trades about -0.15 of its total potential returns per unit of risk. Capital ICE 15 is currently generating about 0.22 per unit of volatility. If you would invest  3,611  in Capital ICE 15 on December 5, 2024 and sell it today you would earn a total of  92.00  from holding Capital ICE 15 or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

YuantaP shares Taiwan Top  vs.  Capital ICE 15

YuantaP shares Taiwan

Risk-Adjusted Performance

Very Weak

Over the last 90 days YuantaP shares Taiwan Top has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, YuantaP Shares is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Capital ICE 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital ICE 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Capital ICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with YuantaP Shares and Capital ICE

The main advantage of trading using opposite YuantaP Shares and Capital ICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares position performs unexpectedly, Capital ICE 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 Capital ICE will offset losses from the drop in Capital ICE's long position.

The idea behind YuantaP shares Taiwan Top and Capital ICE 15 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.