Correlation Between Cathay Financial and Chi Hua
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Chi Hua 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 Chi Hua 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 Chi Hua Fitness, you can compare the effects of market volatilities on Cathay Financial and Chi Hua 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 Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Chi Hua.
Diversification Opportunities for Cathay Financial and Chi Hua
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Chi is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness 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 Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Cathay Financial i.e., Cathay Financial and Chi Hua go up and down completely randomly.
Pair Corralation between Cathay Financial and Chi Hua
Assuming the 90 days trading horizon Cathay Financial is expected to generate 22.45 times less return on investment than Chi Hua. But when comparing it to its historical volatility, Cathay Financial Holding is 54.48 times less risky than Chi Hua. It trades about 0.07 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,349 in Chi Hua Fitness on September 3, 2024 and sell it today you would lose (2,629) from holding Chi Hua Fitness or give up 41.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Chi Hua Fitness
Performance |
| Timeline |
| Cathay Financial Holding |
| Chi Hua Fitness |
Cathay Financial and Chi Hua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Chi Hua
The main advantage of trading using opposite Cathay Financial and Chi Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Chi Hua 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 Chi Hua will offset losses from the drop in Chi Hua's long position.| Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance | Cathay Financial vs. Mercuries Associates Holding |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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