Correlation Between Cathay Sustainability and Fuh Hwa

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

Diversification Opportunities for Cathay Sustainability and Fuh Hwa

0.56

Correlation Coefficient

Cathay Sustainability  Fuh Hwa

Very weak diversification

The 3 months correlation between Cathay and Fuh is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High and Fuh Hwa FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa FTSE 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 Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa FTSE has no effect on the direction of Cathay Sustainability i.e., Cathay Sustainability and Fuh Hwa go up and down completely randomly.

Pair Corralation between Cathay Sustainability and Fuh Hwa

Assuming the 90 days trading horizon Cathay Sustainability High is expected to generate 1.07 times more return on investment than Fuh Hwa. However, Cathay Sustainability is 1.07 times more volatile than Fuh Hwa FTSE. It trades about 0.0 of its potential returns per unit of risk. Fuh Hwa FTSE is currently generating about -0.08 per unit of risk. If you would invest  2,275  in Cathay Sustainability High on September 29, 2024 and sell it today you would lose (35.00) from holding Cathay Sustainability High or give up 1.54% of portfolio value over 90 days.

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

Cathay Sustainability High  vs.  Fuh Hwa FTSE

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.

Fuh Hwa FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuh Hwa FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Cathay Sustainability and Fuh Hwa

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

The idea behind Cathay Sustainability High and Fuh Hwa FTSE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.