Correlation Between Cathay Financial and Yonyu Plastics
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Yonyu Plastics 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 Yonyu Plastics 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 Yonyu Plastics Co, you can compare the effects of market volatilities on Cathay Financial and Yonyu Plastics 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 Yonyu Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Yonyu Plastics.
Diversification Opportunities for Cathay Financial and Yonyu Plastics
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Yonyu is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Yonyu Plastics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yonyu Plastics 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 Yonyu Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yonyu Plastics has no effect on the direction of Cathay Financial i.e., Cathay Financial and Yonyu Plastics go up and down completely randomly.
Pair Corralation between Cathay Financial and Yonyu Plastics
Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.09 times less return on investment than Yonyu Plastics. But when comparing it to its historical volatility, Cathay Financial Holding is 1.46 times less risky than Yonyu Plastics. It trades about 0.41 of its potential returns per unit of risk. Yonyu Plastics Co is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,470 in Yonyu Plastics Co on December 1, 2024 and sell it today you would earn a total of 40.00 from holding Yonyu Plastics Co or generate 1.62% 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. Yonyu Plastics Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Yonyu Plastics |
Cathay Financial and Yonyu Plastics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Yonyu Plastics
The main advantage of trading using opposite Cathay Financial and Yonyu Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Yonyu Plastics 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 Yonyu Plastics will offset losses from the drop in Yonyu Plastics' long position.| Cathay Financial vs. Johnson Health Tech | Cathay Financial vs. FarGlory Hotel Co | Cathay Financial vs. Kedge Construction Co | Cathay Financial vs. Ma Kuang Healthcare |
| Yonyu Plastics vs. Ocean Plastics Co | Yonyu Plastics vs. San Fang Chemical | Yonyu Plastics vs. Universal | Yonyu Plastics vs. Asia Polymer 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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