Correlation Between Yuanta Daily and Capital ICE

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

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

Diversification Opportunities for Yuanta Daily and Capital ICE

-0.56

Correlation Coefficient

Yuanta Daily  Capital ICE

Excellent diversification

The 3 months correlation between Yuanta and Capital is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Daily Taiwan 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 Yuanta Daily 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 Yuanta Daily Taiwan 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 Yuanta Daily i.e., Yuanta Daily and Capital ICE go up and down completely randomly.

Pair Corralation between Yuanta Daily and Capital ICE

Assuming the 90 days trading horizon Yuanta Daily Taiwan is expected to generate 3.21 times more return on investment than Capital ICE. However, Yuanta Daily is 3.21 times more volatile than Capital ICE 15. It trades about 0.09 of its potential returns per unit of risk. Capital ICE 15 is currently generating about -0.11 per unit of risk. If you would invest  21,605  in Yuanta Daily Taiwan on September 17, 2024 and sell it today you would earn a total of  2,430  from holding Yuanta Daily Taiwan or generate 11.25% return on investment over 90 days.

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

Yuanta Daily Taiwan  vs.  Capital ICE 15

Yuanta Daily Taiwan

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily Taiwan are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Yuanta Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital ICE 15

Risk-Adjusted Performance

0 of 100

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yuanta Daily and Capital ICE

The main advantage of trading using opposite Yuanta Daily and Capital ICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuanta Daily 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 Yuanta Daily Taiwan 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.