Correlation Between Cathay Financial and MediaTek
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and MediaTek 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 MediaTek 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 MediaTek, you can compare the effects of market volatilities on Cathay Financial and MediaTek 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 MediaTek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and MediaTek.
Diversification Opportunities for Cathay Financial and MediaTek
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and MediaTek is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and MediaTek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediaTek 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 MediaTek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediaTek has no effect on the direction of Cathay Financial i.e., Cathay Financial and MediaTek go up and down completely randomly.
Pair Corralation between Cathay Financial and MediaTek
Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.28 times less return on investment than MediaTek. But when comparing it to its historical volatility, Cathay Financial Holding is 1.75 times less risky than MediaTek. It trades about 0.08 of its potential returns per unit of risk. MediaTek is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 72,900 in MediaTek on August 30, 2024 and sell it today you would earn a total of 52,100 from holding MediaTek or generate 71.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. MediaTek
Performance |
| Timeline |
| Cathay Financial Holding |
| MediaTek |
Cathay Financial and MediaTek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and MediaTek
The main advantage of trading using opposite Cathay Financial and MediaTek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, MediaTek 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 MediaTek will offset losses from the drop in MediaTek'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 |
| MediaTek vs. Hon Hai Precision | MediaTek vs. United Microelectronics | MediaTek vs. LARGAN Precision Co | MediaTek vs. Delta Electronics |
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.
Other Complementary Tools
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |