Correlation Between Cathay Nasdaq and Yuanta Daily

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

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

Diversification Opportunities for Cathay Nasdaq and Yuanta Daily

0.61

Correlation Coefficient

Cathay Nasdaq  Yuanta Daily

Poor diversification

The 3 months correlation between Cathay and Yuanta is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Nasdaq AI and Yuanta Daily Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Daily Taiwan and Cathay Nasdaq 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 Nasdaq AI are associated (or correlated) with Yuanta Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Daily Taiwan has no effect on the direction of Cathay Nasdaq i.e., Cathay Nasdaq and Yuanta Daily go up and down completely randomly.

Pair Corralation between Cathay Nasdaq and Yuanta Daily

Assuming the 90 days trading horizon Cathay Nasdaq AI is expected to generate 1.17 times more return on investment than Yuanta Daily. However, Cathay Nasdaq is 1.17 times more volatile than Yuanta Daily Taiwan. It trades about -0.11 of its potential returns per unit of risk. Yuanta Daily Taiwan is currently generating about -0.17 per unit of risk. If you would invest  3,441  in Cathay Nasdaq AI on October 10, 2024 and sell it today you would lose (98.00) from holding Cathay Nasdaq AI or give up 2.85% of portfolio value over 90 days.

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

Cathay Nasdaq AI  vs.  Yuanta Daily Taiwan

Cathay Nasdaq AI

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Nasdaq AI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cathay Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yuanta Daily Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily Taiwan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuanta Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cathay Nasdaq and Yuanta Daily

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

The idea behind Cathay Nasdaq AI and Yuanta Daily 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.