Correlation Between Cathay Financial and Baolong International
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Baolong International 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 Baolong International 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 Baolong International Co, you can compare the effects of market volatilities on Cathay Financial and Baolong International 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 Baolong International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Baolong International.
Diversification Opportunities for Cathay Financial and Baolong International
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Baolong is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Baolong International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baolong International 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 Baolong International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baolong International has no effect on the direction of Cathay Financial i.e., Cathay Financial and Baolong International go up and down completely randomly.
Pair Corralation between Cathay Financial and Baolong International
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Baolong International. In addition to that, Cathay Financial is 1.42 times more volatile than Baolong International Co. It trades about -0.12 of its total potential returns per unit of risk. Baolong International Co is currently generating about -0.1 per unit of volatility. If you would invest 1,520 in Baolong International Co on September 4, 2024 and sell it today you would lose (25.00) from holding Baolong International Co or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Baolong International Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Baolong International |
Cathay Financial and Baolong International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Baolong International
The main advantage of trading using opposite Cathay Financial and Baolong International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Baolong International 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 Baolong International will offset losses from the drop in Baolong International'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 |
| Baolong International vs. Formosa Petrochemical Corp | Baolong International vs. Cathay 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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