Correlation Between Cathay Financial and Taiwan Styrene
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Taiwan Styrene 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 Taiwan Styrene 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 Taiwan Styrene Monomer, you can compare the effects of market volatilities on Cathay Financial and Taiwan Styrene 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 Taiwan Styrene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Taiwan Styrene.
Diversification Opportunities for Cathay Financial and Taiwan Styrene
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Taiwan is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Taiwan Styrene Monomer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Styrene Monomer 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 Taiwan Styrene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Styrene Monomer has no effect on the direction of Cathay Financial i.e., Cathay Financial and Taiwan Styrene go up and down completely randomly.
Pair Corralation between Cathay Financial and Taiwan Styrene
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.71 times more return on investment than Taiwan Styrene. However, Cathay Financial Holding is 1.42 times less risky than Taiwan Styrene. It trades about -0.32 of its potential returns per unit of risk. Taiwan Styrene Monomer is currently generating about -0.23 per unit of risk. If you would invest 6,960 in Cathay Financial Holding on September 3, 2024 and sell it today you would lose (390.00) from holding Cathay Financial Holding or give up 5.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Taiwan Styrene Monomer
Performance |
| Timeline |
| Cathay Financial Holding |
| Taiwan Styrene Monomer |
Cathay Financial and Taiwan Styrene Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Taiwan Styrene
The main advantage of trading using opposite Cathay Financial and Taiwan Styrene positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Taiwan Styrene 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 Styrene will offset losses from the drop in Taiwan Styrene's long position.| Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mega Financial Holding | Cathay Financial vs. First Financial Holding |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |