Correlation Between Cathay Koreataiwan and YuantaP Shares

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

By analyzing existing cross correlation between Cathay Koreataiwan IT and YuantaP shares MSCI Taiwan, you can compare the effects of market volatilities on Cathay Koreataiwan and YuantaP Shares 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 Koreataiwan with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Koreataiwan and YuantaP Shares.

Diversification Opportunities for Cathay Koreataiwan and YuantaP Shares

0.48

Correlation Coefficient

Cathay Koreataiwan  YuantaP Shares

Very weak diversification

The 3 months correlation between Cathay and YuantaP is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Koreataiwan IT and YuantaP shares MSCI Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares MSCI and Cathay Koreataiwan 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 Koreataiwan IT are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares MSCI has no effect on the direction of Cathay Koreataiwan i.e., Cathay Koreataiwan and YuantaP Shares go up and down completely randomly.

Pair Corralation between Cathay Koreataiwan and YuantaP Shares

Assuming the 90 days trading horizon Cathay Koreataiwan IT is expected to under-perform the YuantaP Shares. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Koreataiwan IT is 1.26 times less risky than YuantaP Shares. The etf trades about -0.04 of its potential returns per unit of risk. The YuantaP shares MSCI Taiwan is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,100  in YuantaP shares MSCI Taiwan on September 26, 2024 and sell it today you would earn a total of  140.00  from holding YuantaP shares MSCI Taiwan or generate 1.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Cathay Koreataiwan IT  vs.  YuantaP shares MSCI Taiwan

Cathay Koreataiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Koreataiwan IT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cathay Koreataiwan is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

YuantaP shares MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares MSCI Taiwan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, YuantaP Shares 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 Koreataiwan and YuantaP Shares

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

The idea behind Cathay Koreataiwan IT and YuantaP shares MSCI Taiwan 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.