Correlation Between Cathay DJIA and Yuanta STOXX

Can any of the company-specific risk be diversified away by investing in both Cathay DJIA and Yuanta STOXX 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 Yuanta STOXX 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 Yuanta STOXX Global, you can compare the effects of market volatilities on Cathay DJIA and Yuanta STOXX 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 Yuanta STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay DJIA and Yuanta STOXX.

Diversification Opportunities for Cathay DJIA and Yuanta STOXX

-0.6

Correlation Coefficient

Cathay DJIA  Yuanta STOXX

Excellent diversification

The 3 months correlation between Cathay and Yuanta is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cathay DJIA Inv and Yuanta STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta STOXX Global 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 Yuanta STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta STOXX Global has no effect on the direction of Cathay DJIA i.e., Cathay DJIA and Yuanta STOXX go up and down completely randomly.

Pair Corralation between Cathay DJIA and Yuanta STOXX

Assuming the 90 days trading horizon Cathay DJIA Inv is expected to generate 0.58 times more return on investment than Yuanta STOXX. However, Cathay DJIA Inv is 1.71 times less risky than Yuanta STOXX. It trades about 0.36 of its potential returns per unit of risk. Yuanta STOXX Global is currently generating about -0.12 per unit of risk. If you would invest  633.00  in Cathay DJIA Inv on October 7, 2024 and sell it today you would earn a total of  42.00  from holding Cathay DJIA Inv or generate 6.64% 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.  Yuanta STOXX Global

Cathay DJIA Inv

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay DJIA Inv are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cathay DJIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Yuanta STOXX Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta STOXX Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Yuanta STOXX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cathay DJIA and Yuanta STOXX

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

The idea behind Cathay DJIA Inv and Yuanta STOXX Global 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.