Correlation Between Cathay Financial and Hota Industrial
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Hota Industrial 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 Hota Industrial 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 Hota Industrial Mfg, you can compare the effects of market volatilities on Cathay Financial and Hota Industrial 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 Hota Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Hota Industrial.
Diversification Opportunities for Cathay Financial and Hota Industrial
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Hota is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg 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 Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of Cathay Financial i.e., Cathay Financial and Hota Industrial go up and down completely randomly.
Pair Corralation between Cathay Financial and Hota Industrial
Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.06 times less return on investment than Hota Industrial. But when comparing it to its historical volatility, Cathay Financial Holding is 1.87 times less risky than Hota Industrial. It trades about 0.07 of its potential returns per unit of risk. Hota Industrial Mfg is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,800 in Hota Industrial Mfg on September 1, 2024 and sell it today you would earn a total of 660.00 from holding Hota Industrial Mfg or generate 11.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Hota Industrial Mfg
Performance |
| Timeline |
| Cathay Financial Holding |
| Hota Industrial Mfg |
Cathay Financial and Hota Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Hota Industrial
The main advantage of trading using opposite Cathay Financial and Hota Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Hota Industrial 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 Hota Industrial will offset losses from the drop in Hota Industrial'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 |
| Hota Industrial vs. Chaintech Technology Corp | Hota Industrial vs. AVerMedia Technologies | Hota Industrial vs. Avision | Hota Industrial vs. Clevo Co |
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.
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