Correlation Between Fubon FTSE and Cathay Sustainability

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

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

Diversification Opportunities for Fubon FTSE and Cathay Sustainability

-0.08

Correlation Coefficient

Fubon FTSE  Cathay Sustainability

Good diversification

The 3 months correlation between Fubon and Cathay is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fubon FTSE Vietnam and Cathay Sustainability High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Sustainability and Fubon FTSE 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 Fubon FTSE Vietnam are associated (or correlated) with Cathay Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Sustainability has no effect on the direction of Fubon FTSE i.e., Fubon FTSE and Cathay Sustainability go up and down completely randomly.

Pair Corralation between Fubon FTSE and Cathay Sustainability

Assuming the 90 days trading horizon Fubon FTSE Vietnam is expected to under-perform the Cathay Sustainability. But the etf apears to be less risky and, when comparing its historical volatility, Fubon FTSE Vietnam is 1.16 times less risky than Cathay Sustainability. The etf trades about -0.06 of its potential returns per unit of risk. The Cathay Sustainability High is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,235  in Cathay Sustainability High on August 31, 2024 and sell it today you would lose (61.00) from holding Cathay Sustainability High or give up 2.73% of portfolio value over 90 days.

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

Fubon FTSE Vietnam  vs.  Cathay Sustainability High

Fubon FTSE Vietnam

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cathay Sustainability

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fubon FTSE and Cathay Sustainability

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

The idea behind Fubon FTSE Vietnam and Cathay Sustainability High 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 Global Correlations module to find global opportunities by holding instruments from different markets.