Correlation Between Fuh Hwa and Cathay SP

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

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

Diversification Opportunities for Fuh Hwa and Cathay SP

-0.52

Correlation Coefficient

Fuh Hwa  Cathay SP

Excellent diversification

The 3 months correlation between Fuh and Cathay is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fuh Hwa Emerging 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 Fuh Hwa 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 Fuh Hwa Emerging 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 Fuh Hwa i.e., Fuh Hwa and Cathay SP go up and down completely randomly.

Pair Corralation between Fuh Hwa and Cathay SP

Assuming the 90 days trading horizon Fuh Hwa Emerging is expected to under-perform the Cathay SP. But the etf apears to be less risky and, when comparing its historical volatility, Fuh Hwa Emerging is 2.13 times less risky than Cathay SP. The etf trades about -0.06 of its potential returns per unit of risk. The Cathay SP North is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,535  in Cathay SP North on September 14, 2024 and sell it today you would earn a total of  735.00  from holding Cathay SP North or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Fuh Hwa Emerging  vs.  Cathay SP North

Fuh Hwa Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cathay SP North

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay SP North are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cathay SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuh Hwa and Cathay SP

The main advantage of trading using opposite Fuh Hwa and Cathay SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuh Hwa 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 Fuh Hwa Emerging 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.