Correlation Between Cathay Sustainability and Yuanta Daily

Can any of the company-specific risk be diversified away by investing in both Cathay Sustainability 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 Sustainability 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 Sustainability High and Yuanta Daily Taiwan, you can compare the effects of market volatilities on Cathay Sustainability 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 Sustainability with a short position of Yuanta Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Sustainability and Yuanta Daily.

Diversification Opportunities for Cathay Sustainability and Yuanta Daily

0.66

Correlation Coefficient

Cathay Sustainability  Yuanta Daily

Poor diversification

The 3 months correlation between Cathay and Yuanta is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High 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 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 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 Sustainability i.e., Cathay Sustainability and Yuanta Daily go up and down completely randomly.

Pair Corralation between Cathay Sustainability and Yuanta Daily

Assuming the 90 days trading horizon Cathay Sustainability is expected to generate 52.13 times less return on investment than Yuanta Daily. But when comparing it to its historical volatility, Cathay Sustainability High is 2.38 times less risky than Yuanta Daily. It trades about 0.0 of its potential returns per unit of risk. Yuanta Daily Taiwan is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24,150  in Yuanta Daily Taiwan on September 27, 2024 and sell it today you would earn a total of  330.00  from holding Yuanta Daily Taiwan or generate 1.37% return on investment over 90 days.

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

Cathay Sustainability High  vs.  Yuanta Daily Taiwan

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.

Yuanta Daily Taiwan

Risk-Adjusted Performance

1 of 100

Weak

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

The main advantage of trading using opposite Cathay Sustainability and Yuanta Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Sustainability 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 Sustainability High 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.