Correlation Between Cathay Financial and Johnson Chemical
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Johnson Chemical 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 Johnson Chemical 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 Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on Cathay Financial and Johnson Chemical 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 Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Johnson Chemical.
Diversification Opportunities for Cathay Financial and Johnson Chemical
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cathay and Johnson is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha 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 Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Cathay Financial i.e., Cathay Financial and Johnson Chemical go up and down completely randomly.
Pair Corralation between Cathay Financial and Johnson Chemical
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.08 times more return on investment than Johnson Chemical. However, Cathay Financial Holding is 12.01 times less risky than Johnson Chemical. It trades about 0.14 of its potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about 0.01 per unit of risk. If you would invest 6,030 in Cathay Financial Holding on September 4, 2024 and sell it today you would earn a total of 80.00 from holding Cathay Financial Holding or generate 1.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Johnson Chemical Pharmaceutica
Performance |
| Timeline |
| Cathay Financial Holding |
| Johnson Chemical Pha |
Cathay Financial and Johnson Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Johnson Chemical
The main advantage of trading using opposite Cathay Financial and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Johnson Chemical 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 Johnson Chemical will offset losses from the drop in Johnson Chemical's long position.| Cathay Financial vs. Johnson Chemical Pharmaceutical | Cathay Financial vs. BenQ Medical Technology | Cathay Financial vs. Qualipoly Chemical Corp | Cathay Financial vs. Chung Hwa Chemical |
| Johnson Chemical vs. Sinphar Pharmaceutical Co | Johnson Chemical vs. WiseChip Semiconductor | Johnson Chemical vs. Novatek Microelectronics Corp | Johnson Chemical vs. Leader 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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