Correlation Between Cathay Financial and Advanced Ceramic
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Advanced Ceramic 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 Advanced Ceramic 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 Advanced Ceramic X, you can compare the effects of market volatilities on Cathay Financial and Advanced Ceramic 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 Advanced Ceramic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Advanced Ceramic.
Diversification Opportunities for Cathay Financial and Advanced Ceramic
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Advanced is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X 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 Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Cathay Financial i.e., Cathay Financial and Advanced Ceramic go up and down completely randomly.
Pair Corralation between Cathay Financial and Advanced Ceramic
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.18 times more return on investment than Advanced Ceramic. However, Cathay Financial Holding is 5.54 times less risky than Advanced Ceramic. It trades about 0.01 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about -0.05 per unit of risk. If you would invest 6,030 in Cathay Financial Holding on October 22, 2024 and sell it today you would earn a total of 70.00 from holding Cathay Financial Holding or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.56% |
| Values | Daily Returns |
Cathay Financial Holding vs. Advanced Ceramic X
Performance |
| Timeline |
| Cathay Financial Holding |
| Advanced Ceramic X |
Cathay Financial and Advanced Ceramic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Advanced Ceramic
The main advantage of trading using opposite Cathay Financial and Advanced Ceramic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Advanced Ceramic 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 Advanced Ceramic will offset losses from the drop in Advanced Ceramic's long position.| Cathay Financial vs. Farglory FTZ Investment | Cathay Financial vs. Galaxy Software Services | Cathay Financial vs. CVC Technologies | Cathay Financial vs. Grand Ocean Retail |
| Advanced Ceramic vs. Amulaire Thermal Technology | Advanced Ceramic vs. Chialin Precision Industrial | Advanced Ceramic vs. Great China Metal | Advanced Ceramic vs. Chernan Metal Industrial |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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