Correlation Between Cathay Taiwan and Yuanta Securities

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

By analyzing existing cross correlation between Cathay Taiwan 5G and Yuanta Securities Investment, you can compare the effects of market volatilities on Cathay Taiwan and Yuanta Securities 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 Taiwan with a short position of Yuanta Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Taiwan and Yuanta Securities.

Diversification Opportunities for Cathay Taiwan and Yuanta Securities

-0.55

Correlation Coefficient

Cathay Taiwan  Yuanta Securities

Excellent diversification

The 3 months correlation between Cathay and Yuanta is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Taiwan 5G and Yuanta Securities Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Securities and Cathay Taiwan 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 Taiwan 5G are associated (or correlated) with Yuanta Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Securities has no effect on the direction of Cathay Taiwan i.e., Cathay Taiwan and Yuanta Securities go up and down completely randomly.

Pair Corralation between Cathay Taiwan and Yuanta Securities

Assuming the 90 days trading horizon Cathay Taiwan 5G is expected to generate 1.24 times more return on investment than Yuanta Securities. However, Cathay Taiwan is 1.24 times more volatile than Yuanta Securities Investment. It trades about 0.13 of its potential returns per unit of risk. Yuanta Securities Investment is currently generating about -0.09 per unit of risk. If you would invest  2,262  in Cathay Taiwan 5G on September 12, 2024 and sell it today you would earn a total of  193.00  from holding Cathay Taiwan 5G or generate 8.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Cathay Taiwan 5G  vs.  Yuanta Securities Investment

Cathay Taiwan 5G

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Taiwan 5G are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Cathay Taiwan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yuanta Securities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cathay Taiwan and Yuanta Securities

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

The idea behind Cathay Taiwan 5G and Yuanta Securities Investment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.