Correlation Between Information Technology and YuantaP Shares
Can any of the company-specific risk be diversified away by investing in both Information Technology 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 Information Technology and YuantaP Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and YuantaP shares SSE50, you can compare the effects of market volatilities on Information Technology 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 Information Technology with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and YuantaP Shares.
Diversification Opportunities for Information Technology and YuantaP Shares
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Information and YuantaP is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and YuantaP shares SSE50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares SSE50 and Information Technology 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 Information Technology Total 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 SSE50 has no effect on the direction of Information Technology i.e., Information Technology and YuantaP Shares go up and down completely randomly.
Pair Corralation between Information Technology and YuantaP Shares
Assuming the 90 days trading horizon Information Technology Total is expected to generate 2.28 times more return on investment than YuantaP Shares. However, Information Technology is 2.28 times more volatile than YuantaP shares SSE50. It trades about 0.04 of its potential returns per unit of risk. YuantaP shares SSE50 is currently generating about 0.01 per unit of risk. If you would invest 3,419 in Information Technology Total on September 7, 2024 and sell it today you would earn a total of 1,466 from holding Information Technology Total or generate 42.88% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Information Technology Total vs. YuantaP shares SSE50
Performance |
Timeline |
Information Technology |
YuantaP shares SSE50 |
Information Technology and YuantaP Shares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Information Technology and YuantaP Shares
The main advantage of trading using opposite Information Technology and YuantaP Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology 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.Information Technology vs. Wistron Corp | Information Technology vs. Wistron NeWeb Corp | Information Technology vs. Pegatron Corp | Information Technology vs. Dimerco Data System |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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