Correlation Between Cathay Financial and Ruentex Development
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ruentex Development 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 Ruentex Development 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 Ruentex Development Co, you can compare the effects of market volatilities on Cathay Financial and Ruentex Development 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 Ruentex Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ruentex Development.
Diversification Opportunities for Cathay Financial and Ruentex Development
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Ruentex is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ruentex Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Development 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 Ruentex Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Development has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ruentex Development go up and down completely randomly.
Pair Corralation between Cathay Financial and Ruentex Development
Assuming the 90 days trading horizon Cathay Financial is expected to generate 11.59 times less return on investment than Ruentex Development. But when comparing it to its historical volatility, Cathay Financial Holding is 5.51 times less risky than Ruentex Development. It trades about 0.03 of its potential returns per unit of risk. Ruentex Development Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,365 in Ruentex Development Co on September 12, 2024 and sell it today you would earn a total of 1,215 from holding Ruentex Development Co or generate 36.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Ruentex Development Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Ruentex Development |
Cathay Financial and Ruentex Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Ruentex Development
The main advantage of trading using opposite Cathay Financial and Ruentex Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ruentex Development 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 Ruentex Development will offset losses from the drop in Ruentex Development's long position.| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
| Ruentex Development vs. Chong Hong Construction | Ruentex Development vs. Symtek Automation Asia | Ruentex Development vs. WiseChip Semiconductor | Ruentex Development vs. Novatek Microelectronics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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