Correlation Between Cathay Financial and Yung Chi
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Yung Chi 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 Yung Chi 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 Yung Chi Paint, you can compare the effects of market volatilities on Cathay Financial and Yung Chi 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 Yung Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Yung Chi.
Diversification Opportunities for Cathay Financial and Yung Chi
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Yung is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Yung Chi Paint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yung Chi Paint 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 Yung Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yung Chi Paint has no effect on the direction of Cathay Financial i.e., Cathay Financial and Yung Chi go up and down completely randomly.
Pair Corralation between Cathay Financial and Yung Chi
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 1.81 times more return on investment than Yung Chi. However, Cathay Financial is 1.81 times more volatile than Yung Chi Paint. It trades about 0.13 of its potential returns per unit of risk. Yung Chi Paint is currently generating about -0.08 per unit of risk. If you would invest 6,290 in Cathay Financial Holding on September 12, 2024 and sell it today you would earn a total of 570.00 from holding Cathay Financial Holding or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Yung Chi Paint
Performance |
| Timeline |
| Cathay Financial Holding |
| Yung Chi Paint |
Cathay Financial and Yung Chi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Yung Chi
The main advantage of trading using opposite Cathay Financial and Yung Chi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Yung Chi 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 Yung Chi will offset losses from the drop in Yung Chi'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 |
| Yung Chi vs. Tainan Spinning Co | Yung Chi vs. Lealea Enterprise Co | Yung Chi vs. China Petrochemical Development | Yung Chi vs. Ruentex Development 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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