Correlation Between Cathay DJIA and Fubon 1

Can any of the company-specific risk be diversified away by investing in both Cathay DJIA and Fubon 1 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 Cathay DJIA and Fubon 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cathay DJIA Inv and Fubon 1 3 Years, you can compare the effects of market volatilities on Cathay DJIA and Fubon 1 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 Cathay DJIA with a short position of Fubon 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay DJIA and Fubon 1.

Diversification Opportunities for Cathay DJIA and Fubon 1

-0.68

Correlation Coefficient

Cathay DJIA  Fubon 1

Excellent diversification

The 3 months correlation between Cathay and Fubon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cathay DJIA Inv and Fubon 1 3 Years in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon 1 3 and Cathay DJIA 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 Cathay DJIA Inv are associated (or correlated) with Fubon 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon 1 3 has no effect on the direction of Cathay DJIA i.e., Cathay DJIA and Fubon 1 go up and down completely randomly.

Pair Corralation between Cathay DJIA and Fubon 1

Assuming the 90 days trading horizon Cathay DJIA Inv is expected to under-perform the Fubon 1. In addition to that, Cathay DJIA is 2.2 times more volatile than Fubon 1 3 Years. It trades about -0.16 of its total potential returns per unit of risk. Fubon 1 3 Years is currently generating about 0.08 per unit of volatility. If you would invest  4,162  in Fubon 1 3 Years on September 13, 2024 and sell it today you would earn a total of  59.00  from holding Fubon 1 3 Years or generate 1.42% return on investment over 90 days.

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

Cathay DJIA Inv  vs.  Fubon 1 3 Years

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.

Fubon 1 3

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon 1 3 Years are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fubon 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cathay DJIA and Fubon 1

The main advantage of trading using opposite Cathay DJIA and Fubon 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay DJIA position performs unexpectedly, Fubon 1 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 Fubon 1 will offset losses from the drop in Fubon 1's long position.

The idea behind Cathay DJIA Inv and Fubon 1 3 Years 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.