Correlation Between Cathay Financial and DV Biomed
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and DV Biomed 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 DV Biomed 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 DV Biomed Co, you can compare the effects of market volatilities on Cathay Financial and DV Biomed 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 DV Biomed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and DV Biomed.
Diversification Opportunities for Cathay Financial and DV Biomed
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and 6539 is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and DV Biomed Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DV Biomed 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 DV Biomed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DV Biomed has no effect on the direction of Cathay Financial i.e., Cathay Financial and DV Biomed go up and down completely randomly.
Pair Corralation between Cathay Financial and DV Biomed
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 1.18 times more return on investment than DV Biomed. However, Cathay Financial is 1.18 times more volatile than DV Biomed Co. It trades about -0.14 of its potential returns per unit of risk. DV Biomed Co is currently generating about -0.18 per unit of risk. If you would invest 6,850 in Cathay Financial Holding on August 30, 2024 and sell it today you would lose (200.00) from holding Cathay Financial Holding or give up 2.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cathay Financial Holding vs. DV Biomed Co
Performance |
| Timeline |
| Cathay Financial Holding |
| DV Biomed |
Cathay Financial and DV Biomed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and DV Biomed
The main advantage of trading using opposite Cathay Financial and DV Biomed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, DV Biomed 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 DV Biomed will offset losses from the drop in DV Biomed'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 |
| DV Biomed vs. Center Laboratories | DV Biomed vs. Handa Pharmaceuticals | DV Biomed vs. Alar Pharmaceuticals | DV Biomed vs. LIWANLI Innovation Co |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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