Correlation Between Cathay Real and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Cathay Real and Taiwan Cement 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 Real and Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Real Estate and Taiwan Cement Corp, you can compare the effects of market volatilities on Cathay Real and Taiwan Cement 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 Real with a short position of Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Real and Taiwan Cement.
Diversification Opportunities for Cathay Real and Taiwan Cement
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Taiwan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Real Estate and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp and Cathay Real 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 Real Estate are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Cathay Real i.e., Cathay Real and Taiwan Cement go up and down completely randomly.
Pair Corralation between Cathay Real and Taiwan Cement
Assuming the 90 days trading horizon Cathay Real Estate is expected to under-perform the Taiwan Cement. In addition to that, Cathay Real is 2.61 times more volatile than Taiwan Cement Corp. It trades about -0.09 of its total potential returns per unit of risk. Taiwan Cement Corp is currently generating about 0.02 per unit of volatility. If you would invest 3,300 in Taiwan Cement Corp on September 1, 2024 and sell it today you would earn a total of 50.00 from holding Taiwan Cement Corp or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Real Estate vs. Taiwan Cement Corp
Performance |
| Timeline |
| Cathay Real Estate |
| Taiwan Cement Corp |
Cathay Real and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Real and Taiwan Cement
The main advantage of trading using opposite Cathay Real and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Real position performs unexpectedly, Taiwan Cement 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 Cement will offset losses from the drop in Taiwan Cement's long position.| Cathay Real vs. Cathay Financial Holding | Cathay Real vs. Nan Ya Plastics | Cathay Real vs. Chang Hwa Commercial | Cathay Real vs. China Development Financial |
| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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