Correlation Between Cathay Financial and Kunyue Development
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Kunyue Development 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 Kunyue Development 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 Kunyue Development Co, you can compare the effects of market volatilities on Cathay Financial and Kunyue Development 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 Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Kunyue Development.
Diversification Opportunities for Cathay Financial and Kunyue Development
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cathay and Kunyue is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development 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 Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Cathay Financial i.e., Cathay Financial and Kunyue Development go up and down completely randomly.
Pair Corralation between Cathay Financial and Kunyue Development
Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.49 times less return on investment than Kunyue Development. In addition to that, Cathay Financial is 1.08 times more volatile than Kunyue Development Co. It trades about 0.34 of its total potential returns per unit of risk. Kunyue Development Co is currently generating about 0.54 per unit of volatility. If you would invest 4,050 in Kunyue Development Co on November 18, 2024 and sell it today you would earn a total of 300.00 from holding Kunyue Development Co or generate 7.41% 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. Kunyue Development Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Kunyue Development |
Cathay Financial and Kunyue Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Kunyue Development
The main advantage of trading using opposite Cathay Financial and Kunyue Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Kunyue Development 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 Kunyue Development will offset losses from the drop in Kunyue Development'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 |
| Kunyue Development vs. Evermore Chemical Industry | Kunyue Development vs. Johnson Chemical Pharmaceutical | Kunyue Development vs. Asia Electronic Material | Kunyue Development vs. Silicon Power 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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