Correlation Between AVerMedia Technologies and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both AVerMedia Technologies and Cathay Financial 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 AVerMedia Technologies and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AVerMedia Technologies and Cathay Financial Holding, you can compare the effects of market volatilities on AVerMedia Technologies and Cathay Financial 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 AVerMedia Technologies with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVerMedia Technologies and Cathay Financial.
Diversification Opportunities for AVerMedia Technologies and Cathay Financial
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AVerMedia and Cathay is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding and AVerMedia Technologies 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 AVerMedia Technologies are associated (or correlated) with Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and Cathay Financial go up and down completely randomly.
Pair Corralation between AVerMedia Technologies and Cathay Financial
Assuming the 90 days trading horizon AVerMedia Technologies is expected to generate 20.32 times more return on investment than Cathay Financial. However, AVerMedia Technologies is 20.32 times more volatile than Cathay Financial Holding. It trades about 0.08 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.07 per unit of risk. If you would invest 4,845 in AVerMedia Technologies on November 7, 2024 and sell it today you would earn a total of 165.00 from holding AVerMedia Technologies or generate 3.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
AVerMedia Technologies vs. Cathay Financial Holding
Performance |
| Timeline |
| AVerMedia Technologies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Cathay Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
AVerMedia Technologies and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AVerMedia Technologies and Cathay Financial
The main advantage of trading using opposite AVerMedia Technologies and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVerMedia Technologies position performs unexpectedly, Cathay Financial 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 Financial will offset losses from the drop in Cathay Financial's long position.The idea behind AVerMedia Technologies and Cathay Financial Holding 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.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |