Correlation Between Cathay Sustainability and Sinopac TAIEX

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

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

Diversification Opportunities for Cathay Sustainability and Sinopac TAIEX

0.63

Correlation Coefficient

Cathay Sustainability  Sinopac TAIEX

Poor diversification

The 3 months correlation between Cathay and Sinopac is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High and Sinopac TAIEX ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopac TAIEX ETF and Cathay Sustainability 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 Sustainability High are associated (or correlated) with Sinopac TAIEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopac TAIEX ETF has no effect on the direction of Cathay Sustainability i.e., Cathay Sustainability and Sinopac TAIEX go up and down completely randomly.

Pair Corralation between Cathay Sustainability and Sinopac TAIEX

Assuming the 90 days trading horizon Cathay Sustainability is expected to generate 1.04 times less return on investment than Sinopac TAIEX. But when comparing it to its historical volatility, Cathay Sustainability High is 1.11 times less risky than Sinopac TAIEX. It trades about 0.1 of its potential returns per unit of risk. Sinopac TAIEX ETF is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,200  in Sinopac TAIEX ETF on September 27, 2024 and sell it today you would earn a total of  4,425  from holding Sinopac TAIEX ETF or generate 61.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Cathay Sustainability High  vs.  Sinopac TAIEX ETF

Cathay Sustainability

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sinopac TAIEX ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sinopac TAIEX ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sinopac TAIEX 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 Sustainability and Sinopac TAIEX

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

The idea behind Cathay Sustainability High and Sinopac TAIEX ETF 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.