Correlation Between Cathay Financial and Chun Yuan
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Chun Yuan 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 Chun Yuan 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 Chun Yuan Steel, you can compare the effects of market volatilities on Cathay Financial and Chun Yuan 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 Chun Yuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Chun Yuan.
Diversification Opportunities for Cathay Financial and Chun Yuan
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Chun is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Chun Yuan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chun Yuan Steel 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 Chun Yuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chun Yuan Steel has no effect on the direction of Cathay Financial i.e., Cathay Financial and Chun Yuan go up and down completely randomly.
Pair Corralation between Cathay Financial and Chun Yuan
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Chun Yuan. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.35 times less risky than Chun Yuan. The stock trades about -0.13 of its potential returns per unit of risk. The Chun Yuan Steel is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,860 in Chun Yuan Steel on August 29, 2024 and sell it today you would lose (5.00) from holding Chun Yuan Steel or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Chun Yuan Steel
Performance |
| Timeline |
| Cathay Financial Holding |
| Chun Yuan Steel |
Cathay Financial and Chun Yuan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Chun Yuan
The main advantage of trading using opposite Cathay Financial and Chun Yuan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Chun Yuan 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 Chun Yuan will offset losses from the drop in Chun Yuan's long position.| Cathay Financial vs. Taiwan Secom Co | Cathay Financial vs. TTET Union Corp | Cathay Financial vs. China Steel Chemical | Cathay Financial vs. Taiwan Shin Kong |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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