Correlation Between Cathay Sustainability and Fubon TWSE

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

Diversification Opportunities for Cathay Sustainability and Fubon TWSE

0.57

Correlation Coefficient

Cathay Sustainability  Fubon TWSE

Very weak diversification

The 3 months correlation between Cathay and Fubon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High and Fubon TWSE Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon TWSE Corporate 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 Fubon TWSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon TWSE Corporate has no effect on the direction of Cathay Sustainability i.e., Cathay Sustainability and Fubon TWSE go up and down completely randomly.

Pair Corralation between Cathay Sustainability and Fubon TWSE

Assuming the 90 days trading horizon Cathay Sustainability High is expected to under-perform the Fubon TWSE. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Sustainability High is 1.22 times less risky than Fubon TWSE. The etf trades about 0.0 of its potential returns per unit of risk. The Fubon TWSE Corporate is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,426  in Fubon TWSE Corporate on September 29, 2024 and sell it today you would earn a total of  105.00  from holding Fubon TWSE Corporate or generate 2.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

Cathay Sustainability High  vs.  Fubon TWSE Corporate

Cathay Sustainability

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Sustainability High are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Fubon TWSE Corporate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon TWSE Corporate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fubon TWSE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cathay Sustainability and Fubon TWSE

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

The idea behind Cathay Sustainability High and Fubon TWSE Corporate 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.