Correlation Between Cathay Financial and Wafer Works
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Wafer Works 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 Wafer Works 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 Wafer Works, you can compare the effects of market volatilities on Cathay Financial and Wafer Works 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 Wafer Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Wafer Works.
Diversification Opportunities for Cathay Financial and Wafer Works
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Wafer is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Wafer Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wafer Works 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 Wafer Works. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wafer Works has no effect on the direction of Cathay Financial i.e., Cathay Financial and Wafer Works go up and down completely randomly.
Pair Corralation between Cathay Financial and Wafer Works
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.08 times more return on investment than Wafer Works. However, Cathay Financial Holding is 13.0 times less risky than Wafer Works. It trades about 0.15 of its potential returns per unit of risk. Wafer Works is currently generating about -0.09 per unit of risk. If you would invest 6,070 in Cathay Financial Holding on September 4, 2024 and sell it today you would earn a total of 30.00 from holding Cathay Financial Holding or generate 0.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Wafer Works
Performance |
| Timeline |
| Cathay Financial Holding |
| Wafer Works |
Cathay Financial and Wafer Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Wafer Works
The main advantage of trading using opposite Cathay Financial and Wafer Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Wafer Works 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 Wafer Works will offset losses from the drop in Wafer Works' 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 |
| Wafer Works vs. Taiwan Semiconductor Manufacturing | Wafer Works vs. Yang Ming Marine | Wafer Works vs. AU Optronics | Wafer Works vs. Innolux Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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