Correlation Between Cathay Financial and Taiwan Sakura
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Taiwan Sakura 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 Taiwan Sakura 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 Taiwan Sakura Corp, you can compare the effects of market volatilities on Cathay Financial and Taiwan Sakura 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 Taiwan Sakura. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Taiwan Sakura.
Diversification Opportunities for Cathay Financial and Taiwan Sakura
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Taiwan is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Taiwan Sakura Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Sakura 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 Taiwan Sakura. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Sakura Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Taiwan Sakura go up and down completely randomly.
Pair Corralation between Cathay Financial and Taiwan Sakura
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Taiwan Sakura. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.13 times less risky than Taiwan Sakura. The stock trades about -0.15 of its potential returns per unit of risk. The Taiwan Sakura Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,460 in Taiwan Sakura Corp on August 27, 2024 and sell it today you would earn a total of 130.00 from holding Taiwan Sakura Corp or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Taiwan Sakura Corp
Performance |
| Timeline |
| Cathay Financial Holding |
| Taiwan Sakura Corp |
Cathay Financial and Taiwan Sakura Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Taiwan Sakura
The main advantage of trading using opposite Cathay Financial and Taiwan Sakura positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Taiwan Sakura 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 Taiwan Sakura will offset losses from the drop in Taiwan Sakura'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 |
| Taiwan Sakura vs. Yulon Finance Corp | Taiwan Sakura vs. Taiwan Secom Co | Taiwan Sakura vs. Pou Chen Corp | Taiwan Sakura vs. Taiwan Hon Chuan |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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