Correlation Between Cathay Financial and AU Optronics
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and AU Optronics 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 AU Optronics 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 AU Optronics, you can compare the effects of market volatilities on Cathay Financial and AU Optronics 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 AU Optronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and AU Optronics.
Diversification Opportunities for Cathay Financial and AU Optronics
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and 2409 is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and AU Optronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AU Optronics 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 AU Optronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AU Optronics has no effect on the direction of Cathay Financial i.e., Cathay Financial and AU Optronics go up and down completely randomly.
Pair Corralation between Cathay Financial and AU Optronics
Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.75 times less return on investment than AU Optronics. But when comparing it to its historical volatility, Cathay Financial Holding is 6.9 times less risky than AU Optronics. It trades about 0.21 of its potential returns per unit of risk. AU Optronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,555 in AU Optronics on September 15, 2024 and sell it today you would earn a total of 20.00 from holding AU Optronics or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. AU Optronics
Performance |
| Timeline |
| Cathay Financial Holding |
| AU Optronics |
Cathay Financial and AU Optronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and AU Optronics
The main advantage of trading using opposite Cathay Financial and AU Optronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, AU Optronics 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 AU Optronics will offset losses from the drop in AU Optronics' long position.| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mercuries Life Insurance | Cathay Financial vs. Mercuries Associates Holding |
| AU Optronics vs. Innolux Corp | AU Optronics vs. United Microelectronics | AU Optronics vs. China Steel Corp | AU Optronics vs. Quanta Computer |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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