Correlation Between Cathay Financial and Lucky Cement
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Lucky 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 Financial and Lucky Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Financial Holding and Lucky Cement Co, you can compare the effects of market volatilities on Cathay Financial and Lucky 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 Financial with a short position of Lucky Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Lucky Cement.
Diversification Opportunities for Cathay Financial and Lucky Cement
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Lucky is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Lucky Cement Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucky Cement and Cathay Financial 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 Financial Holding are associated (or correlated) with Lucky Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucky Cement has no effect on the direction of Cathay Financial i.e., Cathay Financial and Lucky Cement go up and down completely randomly.
Pair Corralation between Cathay Financial and Lucky Cement
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Lucky Cement. In addition to that, Cathay Financial is 1.47 times more volatile than Lucky Cement Co. It trades about -0.14 of its total potential returns per unit of risk. Lucky Cement Co is currently generating about -0.12 per unit of volatility. If you would invest 1,475 in Lucky Cement Co on August 30, 2024 and sell it today you would lose (25.00) from holding Lucky Cement Co or give up 1.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Lucky Cement Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Lucky Cement |
Cathay Financial and Lucky Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Lucky Cement
The main advantage of trading using opposite Cathay Financial and Lucky Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Lucky 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 Lucky Cement will offset losses from the drop in Lucky Cement's long position.| Cathay Financial vs. Taiwan Secom Co | Cathay Financial vs. TTET Union Corp | Cathay Financial vs. China Steel Chemical | Cathay Financial vs. Taiwan Shin Kong |
| Lucky Cement vs. Universal Cement Corp | Lucky Cement vs. Chia Hsin Cement | Lucky Cement vs. Hsing Ta Cement | Lucky Cement vs. Asia Cement 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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