Correlation Between Cathay Financial and Innolux Corp
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Innolux Corp 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 Innolux Corp 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 Innolux Corp, you can compare the effects of market volatilities on Cathay Financial and Innolux Corp 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 Innolux Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Innolux Corp.
Diversification Opportunities for Cathay Financial and Innolux Corp
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cathay and Innolux is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Innolux Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innolux 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 Innolux Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innolux Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Innolux Corp go up and down completely randomly.
Pair Corralation between Cathay Financial and Innolux Corp
Assuming the 90 days trading horizon Cathay Financial is expected to generate 11.3 times less return on investment than Innolux Corp. But when comparing it to its historical volatility, Cathay Financial Holding is 6.22 times less risky than Innolux Corp. It trades about 0.02 of its potential returns per unit of risk. Innolux Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,270 in Innolux Corp on September 14, 2024 and sell it today you would earn a total of 265.00 from holding Innolux Corp or generate 20.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Innolux Corp
Performance |
| Timeline |
| Cathay Financial Holding |
| Innolux Corp |
Cathay Financial and Innolux Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Innolux Corp
The main advantage of trading using opposite Cathay Financial and Innolux Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Innolux Corp 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 Innolux Corp will offset losses from the drop in Innolux Corp's long position.| Cathay Financial vs. C Media Electronics | Cathay Financial vs. Holiday Entertainment Co | Cathay Financial vs. IBF Financial Holdings | Cathay Financial vs. Shinkong Insurance Co |
| Innolux Corp vs. AU Optronics | Innolux Corp vs. China Steel Corp | Innolux Corp vs. Hon Hai Precision | Innolux Corp vs. Delta Electronics |
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.
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