Correlation Between Paradigm and Cathay Koreataiwan

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

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

Diversification Opportunities for Paradigm and Cathay Koreataiwan

0.45

Correlation Coefficient

Paradigm  Cathay Koreataiwan

Very weak diversification

The 3 months correlation between Paradigm and Cathay is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm SP GSCI and Cathay Koreataiwan IT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Koreataiwan and Paradigm 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 Paradigm SP GSCI are associated (or correlated) with Cathay Koreataiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Koreataiwan has no effect on the direction of Paradigm i.e., Paradigm and Cathay Koreataiwan go up and down completely randomly.

Pair Corralation between Paradigm and Cathay Koreataiwan

Assuming the 90 days trading horizon Paradigm SP GSCI is expected to under-perform the Cathay Koreataiwan. In addition to that, Paradigm is 3.48 times more volatile than Cathay Koreataiwan IT. It trades about -0.03 of its total potential returns per unit of risk. Cathay Koreataiwan IT is currently generating about -0.04 per unit of volatility. If you would invest  3,353  in Cathay Koreataiwan IT on September 3, 2024 and sell it today you would lose (103.00) from holding Cathay Koreataiwan IT or give up 3.07% of portfolio value over 90 days.

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

Paradigm SP GSCI  vs.  Cathay Koreataiwan IT

Paradigm SP GSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paradigm SP GSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Cathay Koreataiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Koreataiwan IT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cathay Koreataiwan is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Paradigm and Cathay Koreataiwan

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

The idea behind Paradigm SP GSCI and Cathay Koreataiwan IT 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.