Correlation Between Capital Taiex and Cathay SP

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

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

Diversification Opportunities for Capital Taiex and Cathay SP

-0.16

Correlation Coefficient

Capital Taiex  Cathay SP

Good diversification

The 3 months correlation between Capital and Cathay is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Capital Taiex Daily and Cathay SP North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay SP North and Capital Taiex 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 Capital Taiex Daily are associated (or correlated) with Cathay SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay SP North has no effect on the direction of Capital Taiex i.e., Capital Taiex and Cathay SP go up and down completely randomly.

Pair Corralation between Capital Taiex and Cathay SP

Assuming the 90 days trading horizon Capital Taiex Daily is expected to generate 0.97 times more return on investment than Cathay SP. However, Capital Taiex Daily is 1.03 times less risky than Cathay SP. It trades about -0.02 of its potential returns per unit of risk. Cathay SP North is currently generating about -0.15 per unit of risk. If you would invest  227.00  in Capital Taiex Daily on December 4, 2024 and sell it today you would lose (1.00) from holding Capital Taiex Daily or give up 0.44% of portfolio value over 90 days.

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

Capital Taiex Daily  vs.  Cathay SP North

Capital Taiex Daily

Risk-Adjusted Performance

Weak

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

Cathay SP North

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cathay SP North has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Capital Taiex and Cathay SP

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

The idea behind Capital Taiex Daily and Cathay SP North 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.