Correlation Between Yuanta SP and Yuanta Daily

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

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

Diversification Opportunities for Yuanta SP and Yuanta Daily

0.65

Correlation Coefficient

Yuanta SP  Yuanta Daily

Poor diversification

The 3 months correlation between Yuanta and Yuanta is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta SP GSCI and Yuanta Daily Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Daily Taiwan and Yuanta SP 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 SP GSCI are associated (or correlated) with Yuanta Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Daily Taiwan has no effect on the direction of Yuanta SP i.e., Yuanta SP and Yuanta Daily go up and down completely randomly.

Pair Corralation between Yuanta SP and Yuanta Daily

Assuming the 90 days trading horizon Yuanta SP is expected to generate 2.71 times less return on investment than Yuanta Daily. But when comparing it to its historical volatility, Yuanta SP GSCI is 2.06 times less risky than Yuanta Daily. It trades about 0.06 of its potential returns per unit of risk. Yuanta Daily Taiwan is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21,960  in Yuanta Daily Taiwan on September 14, 2024 and sell it today you would earn a total of  2,180  from holding Yuanta Daily Taiwan or generate 9.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Yuanta SP GSCI  vs.  Yuanta Daily Taiwan

Yuanta SP GSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta SP GSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yuanta SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yuanta Daily Taiwan

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily Taiwan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuanta Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Yuanta SP and Yuanta Daily

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

The idea behind Yuanta SP GSCI and Yuanta Daily Taiwan 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.