Correlation Between Cathay TIP and Cathay Bloomberg

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

By analyzing existing cross correlation between Cathay TIP TAIEX and Cathay Bloomberg Barclays, you can compare the effects of market volatilities on Cathay TIP and Cathay Bloomberg 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 TIP with a short position of Cathay Bloomberg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay TIP and Cathay Bloomberg.

Diversification Opportunities for Cathay TIP and Cathay Bloomberg

-0.22

Correlation Coefficient

Cathay TIP  Cathay Bloomberg

Very good diversification

The 3 months correlation between Cathay and Cathay is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cathay TIP TAIEX and Cathay Bloomberg Barclays in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Bloomberg Barclays and Cathay TIP 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 TIP TAIEX are associated (or correlated) with Cathay Bloomberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Bloomberg Barclays has no effect on the direction of Cathay TIP i.e., Cathay TIP and Cathay Bloomberg go up and down completely randomly.

Pair Corralation between Cathay TIP and Cathay Bloomberg

Assuming the 90 days trading horizon Cathay TIP TAIEX is expected to generate 0.71 times more return on investment than Cathay Bloomberg. However, Cathay TIP TAIEX is 1.4 times less risky than Cathay Bloomberg. It trades about 0.12 of its potential returns per unit of risk. Cathay Bloomberg Barclays is currently generating about -0.06 per unit of risk. If you would invest  2,848  in Cathay TIP TAIEX on September 13, 2024 and sell it today you would earn a total of  99.00  from holding Cathay TIP TAIEX or generate 3.48% return on investment over 90 days.

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

Cathay TIP TAIEX  vs.  Cathay Bloomberg Barclays

Cathay TIP TAIEX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay TIP TAIEX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay TIP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cathay Bloomberg Barclays

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Bloomberg Barclays has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cathay Bloomberg is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cathay TIP and Cathay Bloomberg

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

The idea behind Cathay TIP TAIEX and Cathay Bloomberg Barclays 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.