Correlation Between Cathay Financial and Ton Yi
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ton Yi 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 Ton Yi 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 Ton Yi Industrial, you can compare the effects of market volatilities on Cathay Financial and Ton Yi 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 Ton Yi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ton Yi.
Diversification Opportunities for Cathay Financial and Ton Yi
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cathay and Ton is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ton Yi Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ton Yi 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 Ton Yi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ton Yi Industrial has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ton Yi go up and down completely randomly.
Pair Corralation between Cathay Financial and Ton Yi
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 1.06 times more return on investment than Ton Yi. However, Cathay Financial is 1.06 times more volatile than Ton Yi Industrial. It trades about 0.08 of its potential returns per unit of risk. Ton Yi Industrial is currently generating about -0.01 per unit of risk. If you would invest 4,090 in Cathay Financial Holding on September 4, 2024 and sell it today you would earn a total of 2,670 from holding Cathay Financial Holding or generate 65.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Ton Yi Industrial
Performance |
| Timeline |
| Cathay Financial Holding |
| Ton Yi Industrial |
Cathay Financial and Ton Yi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Ton Yi
The main advantage of trading using opposite Cathay Financial and Ton Yi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ton Yi 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 Ton Yi will offset losses from the drop in Ton Yi'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 |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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