Correlation Between Cathay Financial and TUL
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and TUL 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 TUL 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 TUL Corporation, you can compare the effects of market volatilities on Cathay Financial and TUL 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 TUL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and TUL.
Diversification Opportunities for Cathay Financial and TUL
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and TUL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and TUL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TUL Corporation 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 TUL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TUL Corporation has no effect on the direction of Cathay Financial i.e., Cathay Financial and TUL go up and down completely randomly.
Pair Corralation between Cathay Financial and TUL
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the TUL. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 14.07 times less risky than TUL. The stock trades about -0.07 of its potential returns per unit of risk. The TUL Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6,900 in TUL Corporation on November 4, 2024 and sell it today you would earn a total of 80.00 from holding TUL Corporation or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. TUL Corp.
Performance |
| Timeline |
| Cathay Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| TUL Corporation |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cathay Financial and TUL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and TUL
The main advantage of trading using opposite Cathay Financial and TUL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, TUL 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 TUL will offset losses from the drop in TUL's long position.The idea behind Cathay Financial Holding and TUL Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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