Correlation Between YuantaP Shares and Cathay DJIA

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

By analyzing existing cross correlation between YuantaP shares Taiwan Electronics and Cathay DJIA Inv, you can compare the effects of market volatilities on YuantaP Shares and Cathay DJIA 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 Cathay DJIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and Cathay DJIA.

Diversification Opportunities for YuantaP Shares and Cathay DJIA

-0.53

Correlation Coefficient

YuantaP Shares  Cathay DJIA

Excellent diversification

The 3 months correlation between YuantaP and Cathay is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Electron and Cathay DJIA Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay DJIA Inv 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 Electronics are associated (or correlated) with Cathay DJIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay DJIA Inv has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and Cathay DJIA go up and down completely randomly.

Pair Corralation between YuantaP Shares and Cathay DJIA

Assuming the 90 days trading horizon YuantaP shares Taiwan Electronics is expected to generate 2.12 times more return on investment than Cathay DJIA. However, YuantaP Shares is 2.12 times more volatile than Cathay DJIA Inv. It trades about 0.12 of its potential returns per unit of risk. Cathay DJIA Inv is currently generating about -0.2 per unit of risk. If you would invest  9,300  in YuantaP shares Taiwan Electronics on September 5, 2024 and sell it today you would earn a total of  945.00  from holding YuantaP shares Taiwan Electronics or generate 10.16% 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 Electron  vs.  Cathay DJIA Inv

YuantaP shares Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares Taiwan Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, YuantaP Shares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cathay DJIA Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay DJIA Inv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with YuantaP Shares and Cathay DJIA

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

The idea behind YuantaP shares Taiwan Electronics and Cathay DJIA Inv 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.