Correlation Between Cathay Financial and Pou Chen
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Pou Chen 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 Pou Chen 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 Pou Chen Corp, you can compare the effects of market volatilities on Cathay Financial and Pou Chen 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 Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Pou Chen.
Diversification Opportunities for Cathay Financial and Pou Chen
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Pou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp 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 Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Pou Chen go up and down completely randomly.
Pair Corralation between Cathay Financial and Pou Chen
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.9 times more return on investment than Pou Chen. However, Cathay Financial Holding is 1.11 times less risky than Pou Chen. It trades about 0.11 of its potential returns per unit of risk. Pou Chen Corp is currently generating about 0.1 per unit of risk. If you would invest 4,395 in Cathay Financial Holding on August 25, 2024 and sell it today you would earn a total of 2,285 from holding Cathay Financial Holding or generate 51.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Pou Chen Corp
Performance |
| Timeline |
| Cathay Financial Holding |
| Pou Chen Corp |
Cathay Financial and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Pou Chen
The main advantage of trading using opposite Cathay Financial and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen'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 |
| Pou Chen vs. Taiwan Semiconductor Manufacturing | Pou Chen vs. Hon Hai Precision | Pou Chen vs. MediaTek | Pou Chen vs. Chunghwa Telecom 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |