Correlation Between Cathay Financial and Song Ho
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Song Ho 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 Song Ho 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 Song Ho Industrial, you can compare the effects of market volatilities on Cathay Financial and Song Ho 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 Song Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Song Ho.
Diversification Opportunities for Cathay Financial and Song Ho
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Song is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Song Ho Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Song Ho Industrial 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 Song Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Song Ho Industrial has no effect on the direction of Cathay Financial i.e., Cathay Financial and Song Ho go up and down completely randomly.
Pair Corralation between Cathay Financial and Song Ho
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 2.11 times more return on investment than Song Ho. However, Cathay Financial is 2.11 times more volatile than Song Ho Industrial. It trades about 0.08 of its potential returns per unit of risk. Song Ho Industrial is currently generating about -0.01 per unit of risk. If you would invest 4,405 in Cathay Financial Holding on September 2, 2024 and sell it today you would earn a total of 2,165 from holding Cathay Financial Holding or generate 49.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Cathay Financial Holding vs. Song Ho Industrial
Performance |
| Timeline |
| Cathay Financial Holding |
| Song Ho Industrial |
Cathay Financial and Song Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Song Ho
The main advantage of trading using opposite Cathay Financial and Song Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Song Ho 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 Song Ho will offset losses from the drop in Song Ho'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 |
| Song Ho vs. Elite Semiconductor Memory | Song Ho vs. Founding Construction Development | Song Ho vs. uPI Semiconductor Corp | Song Ho vs. Hung Sheng Construction |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |