Correlation Between Cathay Chemical and Pou Chen
Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and Pou Chen 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 Chemical and Pou Chen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Chemical Works and Pou Chen Corp, you can compare the effects of market volatilities on Cathay Chemical and Pou Chen 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 Chemical with a short position of Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and Pou Chen.
Diversification Opportunities for Cathay Chemical and Pou Chen
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Pou is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp and Cathay Chemical 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 Chemical Works are associated (or correlated) with Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and Pou Chen go up and down completely randomly.
Pair Corralation between Cathay Chemical and Pou Chen
Assuming the 90 days trading horizon Cathay Chemical Works is expected to under-perform the Pou Chen. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Chemical Works is 1.62 times less risky than Pou Chen. The stock trades about -0.19 of its potential returns per unit of risk. The Pou Chen Corp is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 3,830 in Pou Chen Corp on August 28, 2024 and sell it today you would earn a total of 475.00 from holding Pou Chen Corp or generate 12.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Chemical Works vs. Pou Chen Corp
Performance |
| Timeline |
| Cathay Chemical Works |
| Pou Chen Corp |
Cathay Chemical and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Chemical and Pou Chen
The main advantage of trading using opposite Cathay Chemical and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen's long position.| Cathay Chemical vs. Cheng Shin Rubber | Cathay Chemical vs. China Steel Chemical | Cathay Chemical vs. Yulon Motor Co |
| Pou Chen vs. Taiwan Semiconductor Manufacturing | Pou Chen vs. Hon Hai Precision | Pou Chen vs. MediaTek | Pou Chen vs. Chunghwa Telecom Co |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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