Correlation Between Cathay Taiwan and YuantaP Shares

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

By analyzing existing cross correlation between Cathay Taiwan 5G and YuantaP shares Taiwan Mid Cap, you can compare the effects of market volatilities on Cathay Taiwan and YuantaP Shares 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 Taiwan with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and YuantaP Shares.

Diversification Opportunities for Cathay Taiwan and YuantaP Shares

0.09

Correlation Coefficient

Cathay Taiwan  YuantaP Shares

Significant diversification

The 3 months correlation between Cathay and YuantaP is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and YuantaP shares Taiwan Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan and Cathay Taiwan 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 Taiwan 5G are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and YuantaP Shares go up and down completely randomly.

Pair Corralation between Cathay Taiwan and YuantaP Shares

Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 1.25 times more return on investment than YuantaP Shares. However, Cathay Taiwan is 1.25 times more volatile than YuantaP shares Taiwan Mid Cap. It trades about 0.04 of its potential returns per unit of risk. YuantaP shares Taiwan Mid Cap is currently generating about -0.08 per unit of risk. If you would invest  2,319  in Cathay Taiwan 5G on September 3, 2024 and sell it today you would earn a total of  60.00  from holding Cathay Taiwan 5G or generate 2.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Cathay Taiwan 5G  vs.  YuantaP shares Taiwan Mid Cap

Cathay Taiwan 5G

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Taiwan 5G are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay Taiwan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

YuantaP shares Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YuantaP shares Taiwan Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, YuantaP Shares is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cathay Taiwan and YuantaP Shares

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

The idea behind Cathay Taiwan 5G and YuantaP shares Taiwan Mid Cap 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.