Correlation Between Cathay Financial and Adata Technology
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Adata Technology 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 Adata Technology 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 Adata Technology Co, you can compare the effects of market volatilities on Cathay Financial and Adata Technology 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 Adata Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Adata Technology.
Diversification Opportunities for Cathay Financial and Adata Technology
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Adata is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Adata Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adata Technology 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 Adata Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adata Technology has no effect on the direction of Cathay Financial i.e., Cathay Financial and Adata Technology go up and down completely randomly.
Pair Corralation between Cathay Financial and Adata Technology
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Adata Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.34 times less risky than Adata Technology. The stock trades about -0.15 of its potential returns per unit of risk. The Adata Technology Co is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,610 in Adata Technology Co on August 28, 2024 and sell it today you would earn a total of 430.00 from holding Adata Technology Co or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Adata Technology Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Adata Technology |
Cathay Financial and Adata Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Adata Technology
The main advantage of trading using opposite Cathay Financial and Adata Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Adata Technology 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 Adata Technology will offset losses from the drop in Adata Technology'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 |
| Adata Technology vs. Global Unichip Corp | Adata Technology vs. Asmedia Technology | Adata Technology vs. Unimicron Technology Corp | Adata Technology vs. Novatek Microelectronics Corp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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