Correlation Between Cathay Koreataiwan and Sinopac Securities

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

Diversification Opportunities for Cathay Koreataiwan and Sinopac Securities

-0.4

Correlation Coefficient

Cathay Koreataiwan  Sinopac Securities

Very good diversification

The 3 months correlation between Cathay and Sinopac is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Koreataiwan IT and Sinopac Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac Securities Corp 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 Sinopac Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac Securities Corp has no effect on the direction of Cathay Koreataiwan i.e., Cathay Koreataiwan and Sinopac Securities go up and down completely randomly.

Pair Corralation between Cathay Koreataiwan and Sinopac Securities

Assuming the 90 days trading horizon Cathay Koreataiwan IT is expected to under-perform the Sinopac Securities. In addition to that, Cathay Koreataiwan is 1.5 times more volatile than Sinopac Securities Corp. It trades about -0.06 of its total potential returns per unit of risk. Sinopac Securities Corp is currently generating about 0.05 per unit of volatility. If you would invest  3,362  in Sinopac Securities Corp on September 29, 2024 and sell it today you would earn a total of  260.00  from holding Sinopac Securities Corp or generate 7.73% return on investment over 90 days.

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

Cathay Koreataiwan IT  vs.  Sinopac Securities Corp

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.

Sinopac Securities Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopac Securities Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sinopac Securities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cathay Koreataiwan and Sinopac Securities

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

The idea behind Cathay Koreataiwan IT and Sinopac Securities Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.