Correlation Between Cathay Sustainability and YuantaP Shares

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

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

Diversification Opportunities for Cathay Sustainability and YuantaP Shares

0.64

Correlation Coefficient

Cathay Sustainability  YuantaP Shares

Poor diversification

The 3 months correlation between Cathay and YuantaP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Sustainability High and YuantaP shares Taiwan GreTai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan and Cathay Sustainability 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 Cathay Sustainability High are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of Cathay Sustainability i.e., Cathay Sustainability and YuantaP Shares go up and down completely randomly.

Pair Corralation between Cathay Sustainability and YuantaP Shares

Assuming the 90 days trading horizon Cathay Sustainability High is expected to generate 0.49 times more return on investment than YuantaP Shares. However, Cathay Sustainability High is 2.03 times less risky than YuantaP Shares. It trades about -0.06 of its potential returns per unit of risk. YuantaP shares Taiwan GreTai is currently generating about -0.1 per unit of risk. If you would invest  2,230  in Cathay Sustainability High on September 5, 2024 and sell it today you would lose (20.00) from holding Cathay Sustainability High or give up 0.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Cathay Sustainability High  vs.  YuantaP shares Taiwan GreTai

Cathay Sustainability

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Sustainability High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay Sustainability is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

YuantaP shares Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cathay Sustainability and YuantaP Shares

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

The idea behind Cathay Sustainability High and YuantaP shares Taiwan GreTai 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.