Correlation Between Ruentex Development and Cathay Taiwan

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

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

Diversification Opportunities for Ruentex Development and Cathay Taiwan

-0.17

Correlation Coefficient

Ruentex Development  Cathay Taiwan

Good diversification

The 3 months correlation between Ruentex and Cathay is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Ruentex Development Co and Cathay Taiwan 5G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Taiwan 5G and Ruentex Development 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 Ruentex Development Co are associated (or correlated) with Cathay Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Taiwan 5G has no effect on the direction of Ruentex Development i.e., Ruentex Development and Cathay Taiwan go up and down completely randomly.

Pair Corralation between Ruentex Development and Cathay Taiwan

Assuming the 90 days trading horizon Ruentex Development is expected to generate 38.6 times less return on investment than Cathay Taiwan. In addition to that, Ruentex Development is 1.02 times more volatile than Cathay Taiwan 5G. It trades about 0.0 of its total potential returns per unit of risk. Cathay Taiwan 5G is currently generating about 0.18 per unit of volatility. If you would invest  2,183  in Cathay Taiwan 5G on September 11, 2024 and sell it today you would earn a total of  286.00  from holding Cathay Taiwan 5G or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ruentex Development Co  vs.  Cathay Taiwan 5G

Ruentex Development

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cathay Taiwan 5G

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Taiwan 5G are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cathay Taiwan unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ruentex Development and Cathay Taiwan

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

The idea behind Ruentex Development Co and Cathay Taiwan 5G 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 Anywhere module to track or share privately all of your investments from the convenience of any device.