Correlation Between Cathay Financial and Evermore Chemical
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Evermore Chemical 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 Evermore Chemical 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 Evermore Chemical Industry, you can compare the effects of market volatilities on Cathay Financial and Evermore Chemical 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 Evermore Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Evermore Chemical.
Diversification Opportunities for Cathay Financial and Evermore Chemical
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Evermore is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Evermore Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evermore Chemical 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 Evermore Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evermore Chemical has no effect on the direction of Cathay Financial i.e., Cathay Financial and Evermore Chemical go up and down completely randomly.
Pair Corralation between Cathay Financial and Evermore Chemical
Assuming the 90 days trading horizon Cathay Financial is expected to generate 11.18 times less return on investment than Evermore Chemical. But when comparing it to its historical volatility, Cathay Financial Holding is 8.3 times less risky than Evermore Chemical. It trades about 0.03 of its potential returns per unit of risk. Evermore Chemical Industry is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,775 in Evermore Chemical Industry on September 3, 2024 and sell it today you would earn a total of 135.00 from holding Evermore Chemical Industry or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Evermore Chemical Industry
Performance |
| Timeline |
| Cathay Financial Holding |
| Evermore Chemical |
Cathay Financial and Evermore Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Evermore Chemical
The main advantage of trading using opposite Cathay Financial and Evermore Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Evermore Chemical 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 Evermore Chemical will offset losses from the drop in Evermore Chemical'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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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