Correlation Between Cathay Financial and Ruentex Development
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ruentex Development 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 Ruentex Development 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 Ruentex Development Co, you can compare the effects of market volatilities on Cathay Financial and Ruentex Development 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 Ruentex Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ruentex Development.
Diversification Opportunities for Cathay Financial and Ruentex Development
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cathay and Ruentex is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ruentex Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Development 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 Ruentex Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Development has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ruentex Development go up and down completely randomly.
Pair Corralation between Cathay Financial and Ruentex Development
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Ruentex Development. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.12 times less risky than Ruentex Development. The stock trades about -0.1 of its potential returns per unit of risk. The Ruentex Development Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 4,705 in Ruentex Development Co on August 25, 2024 and sell it today you would lose (85.00) from holding Ruentex Development Co or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cathay Financial Holding vs. Ruentex Development Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Ruentex Development |
Cathay Financial and Ruentex Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Ruentex Development
The main advantage of trading using opposite Cathay Financial and Ruentex Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ruentex Development 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 Ruentex Development will offset losses from the drop in Ruentex Development'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 |
| Ruentex Development vs. Ruentex Industries | Ruentex Development vs. Pou Chen Corp | Ruentex Development vs. Fubon Financial Holding | Ruentex Development vs. Cathay 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |