Correlation Between Yuanta SP and Yuanta STOXX

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

By analyzing existing cross correlation between Yuanta SP GSCI and Yuanta STOXX Global, you can compare the effects of market volatilities on Yuanta SP and Yuanta STOXX 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 SP with a short position of Yuanta STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta SP and Yuanta STOXX.

Diversification Opportunities for Yuanta SP and Yuanta STOXX

0.4

Correlation Coefficient

Yuanta SP  Yuanta STOXX

Very weak diversification

The 3 months correlation between Yuanta and Yuanta is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta SP GSCI and Yuanta STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta STOXX Global and Yuanta SP 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 SP GSCI are associated (or correlated) with Yuanta STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta STOXX Global has no effect on the direction of Yuanta SP i.e., Yuanta SP and Yuanta STOXX go up and down completely randomly.

Pair Corralation between Yuanta SP and Yuanta STOXX

Assuming the 90 days trading horizon Yuanta SP is expected to generate 1.82 times less return on investment than Yuanta STOXX. But when comparing it to its historical volatility, Yuanta SP GSCI is 1.56 times less risky than Yuanta STOXX. It trades about 0.1 of its potential returns per unit of risk. Yuanta STOXX Global is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,821  in Yuanta STOXX Global on September 4, 2024 and sell it today you would earn a total of  2,239  from holding Yuanta STOXX Global or generate 46.44% return on investment over 90 days.

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

Yuanta SP GSCI  vs.  Yuanta STOXX Global

Yuanta SP GSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta SP GSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yuanta SP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Yuanta STOXX Global

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta STOXX Global are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Yuanta STOXX unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuanta SP and Yuanta STOXX

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

The idea behind Yuanta SP GSCI and Yuanta STOXX Global 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.