Correlation Between Cathay Financial and Acelon Chemicals
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Acelon Chemicals 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 Acelon Chemicals 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 Acelon Chemicals Fiber, you can compare the effects of market volatilities on Cathay Financial and Acelon Chemicals 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 Acelon Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Acelon Chemicals.
Diversification Opportunities for Cathay Financial and Acelon Chemicals
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Acelon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Acelon Chemicals Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acelon Chemicals Fiber 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 Acelon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acelon Chemicals Fiber has no effect on the direction of Cathay Financial i.e., Cathay Financial and Acelon Chemicals go up and down completely randomly.
Pair Corralation between Cathay Financial and Acelon Chemicals
Assuming the 90 days trading horizon Cathay Financial is expected to generate 12.37 times less return on investment than Acelon Chemicals. But when comparing it to its historical volatility, Cathay Financial Holding is 7.37 times less risky than Acelon Chemicals. It trades about 0.01 of its potential returns per unit of risk. Acelon Chemicals Fiber is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,190 in Acelon Chemicals Fiber on November 28, 2024 and sell it today you would earn a total of 165.00 from holding Acelon Chemicals Fiber or generate 13.87% 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. Acelon Chemicals Fiber
Performance |
| Timeline |
| Cathay Financial Holding |
| Acelon Chemicals Fiber |
Cathay Financial and Acelon Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Acelon Chemicals
The main advantage of trading using opposite Cathay Financial and Acelon Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Acelon Chemicals 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 Acelon Chemicals will offset losses from the drop in Acelon Chemicals' long position.| Cathay Financial vs. Mechema Chemicals Int | Cathay Financial vs. Jinan Acetate Chemical | Cathay Financial vs. Double Bond Chemical | Cathay Financial vs. Standard Chemical Pharmaceutical |
| Acelon Chemicals vs. Honmyue Enterprise Co | Acelon Chemicals vs. Tainan Spinning Co | Acelon Chemicals vs. Chia Her Industrial | Acelon Chemicals vs. Zig Sheng Industrial |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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