Correlation Between Cathay Financial and Grape King
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Grape King 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 Grape King 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 Grape King Bio, you can compare the effects of market volatilities on Cathay Financial and Grape King 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 Grape King. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Grape King.
Diversification Opportunities for Cathay Financial and Grape King
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cathay and Grape is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Grape King Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grape King Bio 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 Grape King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grape King Bio has no effect on the direction of Cathay Financial i.e., Cathay Financial and Grape King go up and down completely randomly.
Pair Corralation between Cathay Financial and Grape King
Assuming the 90 days trading horizon Cathay Financial is expected to generate 2.1 times less return on investment than Grape King. But when comparing it to its historical volatility, Cathay Financial Holding is 3.57 times less risky than Grape King. It trades about 0.27 of its potential returns per unit of risk. Grape King Bio is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 14,100 in Grape King Bio on August 28, 2024 and sell it today you would earn a total of 1,400 from holding Grape King Bio or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Grape King Bio
Performance |
| Timeline |
| Cathay Financial Holding |
| Grape King Bio |
Cathay Financial and Grape King Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Grape King
The main advantage of trading using opposite Cathay Financial and Grape King positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Grape King 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 Grape King will offset losses from the drop in Grape King's long position.| Cathay Financial vs. United Radiant Technology | Cathay Financial vs. Tainet Communication System | Cathay Financial vs. China Airlines | Cathay Financial vs. WinMate Communication INC |
| Grape King vs. Taiwan Cement Corp | Grape King vs. Ruentex Development Co | Grape King vs. Symtek Automation Asia | Grape King vs. CTCI 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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