Correlation Between Yuanta SP and Information Technology

Can any of the company-specific risk be diversified away by investing in both Yuanta SP and Information Technology 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 Information Technology 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 Information Technology Total, you can compare the effects of market volatilities on Yuanta SP and Information Technology 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 Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta SP and Information Technology.

Diversification Opportunities for Yuanta SP and Information Technology

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Correlation Coefficient

Yuanta SP  Information Technology

Pay attention - limited upside

The 3 months correlation between Yuanta and Information is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta SP GSCI and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Yuanta SP i.e., Yuanta SP and Information Technology go up and down completely randomly.

Pair Corralation between Yuanta SP and Information Technology

Assuming the 90 days trading horizon Yuanta SP is expected to generate 4.38 times less return on investment than Information Technology. But when comparing it to its historical volatility, Yuanta SP GSCI is 1.1 times less risky than Information Technology. It trades about 0.01 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,350  in Information Technology Total on September 4, 2024 and sell it today you would earn a total of  165.00  from holding Information Technology Total or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Yuanta SP GSCI  vs.  Information Technology Total

Yuanta SP GSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yuanta SP GSCI has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Information Technology

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Information Technology is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Yuanta SP and Information Technology

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

The idea behind Yuanta SP GSCI and Information Technology Total 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.