Correlation Between YuantaP Shares and CTBC Treasury

Can any of the company-specific risk be diversified away by investing in both YuantaP Shares and CTBC Treasury 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 Treasury 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 Treasury 20, you can compare the effects of market volatilities on YuantaP Shares and CTBC Treasury 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 Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of YuantaP Shares and CTBC Treasury.

Diversification Opportunities for YuantaP Shares and CTBC Treasury

-0.48

Correlation Coefficient

YuantaP Shares  CTBC Treasury

Very good diversification

The 3 months correlation between YuantaP and CTBC is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares MSCI Taiwan and CTBC Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Treasury 20 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 Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Treasury 20 has no effect on the direction of YuantaP Shares i.e., YuantaP Shares and CTBC Treasury go up and down completely randomly.

Pair Corralation between YuantaP Shares and CTBC Treasury

Assuming the 90 days trading horizon YuantaP shares MSCI Taiwan is expected to generate 1.46 times more return on investment than CTBC Treasury. However, YuantaP Shares is 1.46 times more volatile than CTBC Treasury 20. It trades about 0.09 of its potential returns per unit of risk. CTBC Treasury 20 is currently generating about -0.01 per unit of risk. If you would invest  5,780  in YuantaP shares MSCI Taiwan on October 11, 2024 and sell it today you would earn a total of  3,630  from holding YuantaP shares MSCI Taiwan or generate 62.8% 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 Treasury 20

YuantaP shares MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares MSCI Taiwan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, YuantaP Shares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CTBC Treasury 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC Treasury 20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CTBC Treasury 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 CTBC Treasury

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

The idea behind YuantaP shares MSCI Taiwan and CTBC Treasury 20 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.