Correlation Between First Insurance and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both First Insurance 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 First Insurance and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Insurance Co and Cathay Financial Holding, you can compare the effects of market volatilities on First Insurance 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 First Insurance with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Insurance and Cathay Financial.
Diversification Opportunities for First Insurance and Cathay Financial
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Cathay is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding First Insurance Co 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 First Insurance 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 First Insurance Co 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 First Insurance i.e., First Insurance and Cathay Financial go up and down completely randomly.
Pair Corralation between First Insurance and Cathay Financial
Assuming the 90 days trading horizon First Insurance Co is expected to generate 4.61 times more return on investment than Cathay Financial. However, First Insurance is 4.61 times more volatile than Cathay Financial Holding. It trades about 0.35 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.27 per unit of risk. If you would invest 2,295 in First Insurance Co on September 2, 2024 and sell it today you would earn a total of 190.00 from holding First Insurance Co or generate 8.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Insurance Co vs. Cathay Financial Holding
Performance |
| Timeline |
| First Insurance |
| Cathay Financial Holding |
First Insurance and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Insurance and Cathay Financial
The main advantage of trading using opposite First Insurance and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Insurance 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.| First Insurance vs. Central Reinsurance Corp | First Insurance vs. Huaku Development Co | First Insurance vs. Fubon Financial Holding |
| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |