Correlation Between Yuanta Daily and Cathay Sustainability

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

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

Diversification Opportunities for Yuanta Daily and Cathay Sustainability

-0.8

Correlation Coefficient

Yuanta Daily  Cathay Sustainability

Pay attention - limited upside

The 3 months correlation between Yuanta and Cathay is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Daily Taiwan and Cathay Sustainability High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Sustainability and Yuanta Daily 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 Yuanta Daily Taiwan are associated (or correlated) with Cathay Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Sustainability has no effect on the direction of Yuanta Daily i.e., Yuanta Daily and Cathay Sustainability go up and down completely randomly.

Pair Corralation between Yuanta Daily and Cathay Sustainability

Assuming the 90 days trading horizon Yuanta Daily Taiwan is expected to generate 1.3 times more return on investment than Cathay Sustainability. However, Yuanta Daily is 1.3 times more volatile than Cathay Sustainability High. It trades about -0.02 of its potential returns per unit of risk. Cathay Sustainability High is currently generating about -0.04 per unit of risk. If you would invest  344.00  in Yuanta Daily Taiwan on September 2, 2024 and sell it today you would lose (6.00) from holding Yuanta Daily Taiwan or give up 1.74% of portfolio value over 90 days.

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

Yuanta Daily Taiwan  vs.  Cathay Sustainability High

Yuanta Daily Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuanta Daily Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yuanta Daily is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yuanta Daily and Cathay Sustainability

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

The idea behind Yuanta Daily Taiwan and Cathay Sustainability High 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.