Correlation Between YuantaP Shares and CTBC USD

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

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

Diversification Opportunities for YuantaP Shares and CTBC USD

-0.45

Correlation Coefficient

YuantaP Shares  CTBC USD

Very good diversification

The 3 months correlation between YuantaP and CTBC is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares MSCI Taiwan and CTBC USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC USD Corporate 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 MSCI Taiwan are associated (or correlated) with CTBC USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC USD Corporate has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and CTBC USD go up and down completely randomly.

Pair Corralation between YuantaP Shares and CTBC USD

Assuming the 90 days trading horizon YuantaP shares MSCI Taiwan is expected to generate 2.58 times more return on investment than CTBC USD. However, YuantaP Shares is 2.58 times more volatile than CTBC USD Corporate. It trades about 0.11 of its potential returns per unit of risk. CTBC USD Corporate is currently generating about 0.04 per unit of risk. If you would invest  6,390  in YuantaP shares MSCI Taiwan on September 28, 2024 and sell it today you would earn a total of  2,900  from holding YuantaP shares MSCI Taiwan or generate 45.38% 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 MSCI Taiwan  vs.  CTBC USD Corporate

YuantaP shares MSCI

Risk-Adjusted Performance

9 of 100

OK

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

CTBC USD Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with YuantaP Shares and CTBC USD

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

The idea behind YuantaP shares MSCI Taiwan and CTBC USD Corporate 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.