Correlation Between Cathay Financial and Parade Technologies
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Parade Technologies 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 Parade Technologies 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 Parade Technologies, you can compare the effects of market volatilities on Cathay Financial and Parade Technologies 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 Parade Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Parade Technologies.
Diversification Opportunities for Cathay Financial and Parade Technologies
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Parade is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Parade Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parade Technologies 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 Parade Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parade Technologies has no effect on the direction of Cathay Financial i.e., Cathay Financial and Parade Technologies go up and down completely randomly.
Pair Corralation between Cathay Financial and Parade Technologies
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.45 times more return on investment than Parade Technologies. However, Cathay Financial Holding is 2.24 times less risky than Parade Technologies. It trades about 0.08 of its potential returns per unit of risk. Parade Technologies is currently generating about 0.01 per unit of risk. If you would invest 4,095 in Cathay Financial Holding on September 3, 2024 and sell it today you would earn a total of 2,475 from holding Cathay Financial Holding or generate 60.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Parade Technologies
Performance |
| Timeline |
| Cathay Financial Holding |
| Parade Technologies |
Cathay Financial and Parade Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Parade Technologies
The main advantage of trading using opposite Cathay Financial and Parade Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Parade Technologies 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 Parade Technologies will offset losses from the drop in Parade Technologies' 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 |
| Parade Technologies vs. Aspeed Technology | Parade Technologies vs. Silergy Corp | Parade Technologies vs. Novatek Microelectronics Corp | Parade Technologies vs. WIN Semiconductors |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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