Correlation Between Cathay Financial and Taisun Enterprise
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Taisun Enterprise 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 Taisun Enterprise 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 Taisun Enterprise Co, you can compare the effects of market volatilities on Cathay Financial and Taisun Enterprise 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 Taisun Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Taisun Enterprise.
Diversification Opportunities for Cathay Financial and Taisun Enterprise
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Taisun is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Taisun Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taisun Enterprise 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 Taisun Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taisun Enterprise has no effect on the direction of Cathay Financial i.e., Cathay Financial and Taisun Enterprise go up and down completely randomly.
Pair Corralation between Cathay Financial and Taisun Enterprise
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.1 times more return on investment than Taisun Enterprise. However, Cathay Financial Holding is 10.5 times less risky than Taisun Enterprise. It trades about 0.22 of its potential returns per unit of risk. Taisun Enterprise Co is currently generating about -0.14 per unit of risk. If you would invest 6,000 in Cathay Financial Holding on October 26, 2024 and sell it today you would earn a total of 20.00 from holding Cathay Financial Holding or generate 0.33% 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. Taisun Enterprise Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Taisun Enterprise |
Cathay Financial and Taisun Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Taisun Enterprise
The main advantage of trading using opposite Cathay Financial and Taisun Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Taisun Enterprise 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 Taisun Enterprise will offset losses from the drop in Taisun Enterprise's long position.| Cathay Financial vs. Quanta Storage | Cathay Financial vs. Adata Technology Co | Cathay Financial vs. Tong Hwa Synthetic Fiber | Cathay Financial vs. Johnson Chemical Pharmaceutical |
| Taisun Enterprise vs. AGV Products Corp | Taisun Enterprise vs. Wei Chuan Foods | Taisun Enterprise vs. Chia Hsin Cement | Taisun Enterprise vs. Grand Pacific Petrochemical |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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