Correlation Between Cathay Financial and Ampire
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ampire 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 Ampire 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 Ampire Co, you can compare the effects of market volatilities on Cathay Financial and Ampire 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 Ampire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ampire.
Diversification Opportunities for Cathay Financial and Ampire
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Ampire is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ampire Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampire 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 Ampire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampire has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ampire go up and down completely randomly.
Pair Corralation between Cathay Financial and Ampire
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 1.73 times more return on investment than Ampire. However, Cathay Financial is 1.73 times more volatile than Ampire Co. It trades about 0.08 of its potential returns per unit of risk. Ampire Co is currently generating about -0.12 per unit of risk. If you would invest 5,650 in Cathay Financial Holding on September 3, 2024 and sell it today you would earn a total of 920.00 from holding Cathay Financial Holding or generate 16.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Ampire Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Ampire |
Cathay Financial and Ampire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Ampire
The main advantage of trading using opposite Cathay Financial and Ampire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ampire 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 Ampire will offset losses from the drop in Ampire'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 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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