Correlation Between Cathay Financial and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and United Microelectronics 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 United Microelectronics 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 United Microelectronics, you can compare the effects of market volatilities on Cathay Financial and United Microelectronics 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 United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and United Microelectronics.
Diversification Opportunities for Cathay Financial and United Microelectronics
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and United is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics 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 United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Cathay Financial i.e., Cathay Financial and United Microelectronics go up and down completely randomly.
Pair Corralation between Cathay Financial and United Microelectronics
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.75 times more return on investment than United Microelectronics. However, Cathay Financial Holding is 1.34 times less risky than United Microelectronics. It trades about -0.16 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.43 per unit of risk. If you would invest 6,900 in Cathay Financial Holding on August 26, 2024 and sell it today you would lose (220.00) from holding Cathay Financial Holding or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. United Microelectronics
Performance |
| Timeline |
| Cathay Financial Holding |
| United Microelectronics |
Cathay Financial and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and United Microelectronics
The main advantage of trading using opposite Cathay Financial and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, United Microelectronics 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 United Microelectronics will offset losses from the drop in United Microelectronics' 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 |
| United Microelectronics vs. Novatek Microelectronics Corp | United Microelectronics vs. Quanta Computer |
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 Stocks Directory module to find actively traded stocks across global markets.
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