Correlation Between Yuanta EURO and Cathay Taiwan
Can any of the company-specific risk be diversified away by investing in both Yuanta EURO and Cathay Taiwan 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 Yuanta EURO and Cathay Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yuanta EURO STOXX and Cathay Taiwan 5G, you can compare the effects of market volatilities on Yuanta EURO and Cathay Taiwan 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 Yuanta EURO with a short position of Cathay Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta EURO and Cathay Taiwan.
Diversification Opportunities for Yuanta EURO and Cathay Taiwan
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Yuanta and Cathay is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta EURO STOXX and Cathay Taiwan 5G in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Taiwan 5G and Yuanta EURO 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 Yuanta EURO STOXX are associated (or correlated) with Cathay Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Taiwan 5G has no effect on the direction of Yuanta EURO i.e., Yuanta EURO and Cathay Taiwan go up and down completely randomly.
Pair Corralation between Yuanta EURO and Cathay Taiwan
Assuming the 90 days trading horizon Yuanta EURO STOXX is expected to generate 0.33 times more return on investment than Cathay Taiwan. However, Yuanta EURO STOXX is 3.02 times less risky than Cathay Taiwan. It trades about -0.2 of its potential returns per unit of risk. Cathay Taiwan 5G is currently generating about -0.1 per unit of risk. If you would invest 3,620 in Yuanta EURO STOXX on February 6, 2024 and sell it today you would lose (95.00) from holding Yuanta EURO STOXX or give up 2.62% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Yuanta EURO STOXX vs. Cathay Taiwan 5G
Performance |
Timeline |
Yuanta EURO STOXX |
Cathay Taiwan 5G |
Yuanta EURO and Cathay Taiwan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Yuanta EURO and Cathay Taiwan
The main advantage of trading using opposite Yuanta EURO and Cathay Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuanta EURO position performs unexpectedly, Cathay Taiwan 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 Taiwan will offset losses from the drop in Cathay Taiwan's long position.Yuanta EURO vs. Yuanta Daily SP | Yuanta EURO vs. Yuanta Securities Investment | Yuanta EURO vs. Yuanta SP GSCI | Yuanta EURO vs. Yuanta Global NexGen |
Cathay Taiwan vs. Cathay TIP TAIEX | Cathay Taiwan vs. Cathay Nasdaq AI | Cathay Taiwan vs. Cathay Dow Jones | Cathay Taiwan vs. Cathay Bloomberg Barclays |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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