Correlation Between Cathay Financial and YFY
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and YFY 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 YFY 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 YFY Inc, you can compare the effects of market volatilities on Cathay Financial and YFY 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 YFY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and YFY.
Diversification Opportunities for Cathay Financial and YFY
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and YFY is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and YFY Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YFY Inc 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 YFY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YFY Inc has no effect on the direction of Cathay Financial i.e., Cathay Financial and YFY go up and down completely randomly.
Pair Corralation between Cathay Financial and YFY
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the YFY. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.4 times less risky than YFY. The stock trades about -0.32 of its potential returns per unit of risk. The YFY Inc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 3,110 in YFY Inc on September 3, 2024 and sell it today you would lose (60.00) from holding YFY Inc or give up 1.93% 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. YFY Inc
Performance |
| Timeline |
| Cathay Financial Holding |
| YFY Inc |
Cathay Financial and YFY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and YFY
The main advantage of trading using opposite Cathay Financial and YFY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, YFY 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 YFY will offset losses from the drop in YFY'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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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