Correlation Between Cathay Financial and Shinkong Insurance
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Shinkong Insurance 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 Shinkong Insurance 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 Shinkong Insurance Co, you can compare the effects of market volatilities on Cathay Financial and Shinkong Insurance 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 Shinkong Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Shinkong Insurance.
Diversification Opportunities for Cathay Financial and Shinkong Insurance
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cathay and Shinkong is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Shinkong Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinkong Insurance 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 Shinkong Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinkong Insurance has no effect on the direction of Cathay Financial i.e., Cathay Financial and Shinkong Insurance go up and down completely randomly.
Pair Corralation between Cathay Financial and Shinkong Insurance
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Shinkong Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 7.76 times less risky than Shinkong Insurance. The stock trades about -0.17 of its potential returns per unit of risk. The Shinkong Insurance Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9,960 in Shinkong Insurance Co on August 25, 2024 and sell it today you would earn a total of 20.00 from holding Shinkong Insurance Co or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Shinkong Insurance Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Shinkong Insurance |
Cathay Financial and Shinkong Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Shinkong Insurance
The main advantage of trading using opposite Cathay Financial and Shinkong Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Shinkong Insurance 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 Shinkong Insurance will offset losses from the drop in Shinkong Insurance's long position.| Cathay Financial vs. Tehmag Foods | Cathay Financial vs. PlayNitride | Cathay Financial vs. GeneReach Biotechnology | Cathay Financial vs. Sports Gear Co |
| Shinkong Insurance vs. Central Reinsurance Corp | Shinkong Insurance vs. Huaku Development Co | Shinkong Insurance vs. Fubon Financial Holding | Shinkong Insurance vs. Chailease Holding 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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