Correlation Between Cathay Financial and Long Chen
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Long Chen 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 Long Chen 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 Long Chen Paper, you can compare the effects of market volatilities on Cathay Financial and Long Chen 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 Long Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Long Chen.
Diversification Opportunities for Cathay Financial and Long Chen
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Long is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Long Chen Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Chen Paper 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 Long Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Chen Paper has no effect on the direction of Cathay Financial i.e., Cathay Financial and Long Chen go up and down completely randomly.
Pair Corralation between Cathay Financial and Long Chen
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.21 times more return on investment than Long Chen. However, Cathay Financial Holding is 4.83 times less risky than Long Chen. It trades about 0.07 of its potential returns per unit of risk. Long Chen Paper is currently generating about -0.03 per unit of risk. If you would invest 5,450 in Cathay Financial Holding on September 12, 2024 and sell it today you would earn a total of 530.00 from holding Cathay Financial Holding or generate 9.72% 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. Long Chen Paper
Performance |
| Timeline |
| Cathay Financial Holding |
| Long Chen Paper |
Cathay Financial and Long Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Long Chen
The main advantage of trading using opposite Cathay Financial and Long Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Long Chen 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 Long Chen will offset losses from the drop in Long Chen's long position.| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
| Long Chen vs. Tainan Spinning Co | Long Chen vs. Lealea Enterprise Co | Long Chen vs. China Petrochemical Development | Long Chen vs. Ruentex Development Co |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Transaction History View history of all your transactions and understand their impact on performance |