Correlation Between Cathay Chemical and Taiwan Paiho
Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and Taiwan Paiho 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 Taiwan Paiho 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 Taiwan Paiho, you can compare the effects of market volatilities on Cathay Chemical and Taiwan Paiho 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 Taiwan Paiho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and Taiwan Paiho.
Diversification Opportunities for Cathay Chemical and Taiwan Paiho
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Taiwan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and Taiwan Paiho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Paiho 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 Taiwan Paiho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Paiho has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and Taiwan Paiho go up and down completely randomly.
Pair Corralation between Cathay Chemical and Taiwan Paiho
Assuming the 90 days trading horizon Cathay Chemical Works is expected to under-perform the Taiwan Paiho. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Chemical Works is 2.77 times less risky than Taiwan Paiho. The stock trades about -0.34 of its potential returns per unit of risk. The Taiwan Paiho is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,100 in Taiwan Paiho on August 29, 2024 and sell it today you would earn a total of 1,850 from holding Taiwan Paiho or generate 30.33% 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. Taiwan Paiho
Performance |
| Timeline |
| Cathay Chemical Works |
| Taiwan Paiho |
Cathay Chemical and Taiwan Paiho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Chemical and Taiwan Paiho
The main advantage of trading using opposite Cathay Chemical and Taiwan Paiho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, Taiwan Paiho 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 Taiwan Paiho will offset losses from the drop in Taiwan Paiho's long position.| Cathay Chemical vs. Chung Hwa Chemical | Cathay Chemical vs. China Man Made Fiber | Cathay Chemical vs. Sesoda Corp | Cathay Chemical vs. Everlight Chemical Industrial |
| Taiwan Paiho vs. Taiwan Semiconductor Manufacturing | Taiwan Paiho vs. Hon Hai Precision | Taiwan Paiho vs. MediaTek | Taiwan Paiho 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |