Correlation Between Cathay Financial and Yageo Corp
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Yageo Corp 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 Yageo Corp 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 Yageo Corp, you can compare the effects of market volatilities on Cathay Financial and Yageo Corp 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 Yageo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Yageo Corp.
Diversification Opportunities for Cathay Financial and Yageo Corp
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Yageo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Yageo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yageo Corp 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 Yageo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yageo Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Yageo Corp go up and down completely randomly.
Pair Corralation between Cathay Financial and Yageo Corp
Assuming the 90 days trading horizon Cathay Financial is expected to generate 2.07 times less return on investment than Yageo Corp. But when comparing it to its historical volatility, Cathay Financial Holding is 6.35 times less risky than Yageo Corp. It trades about 0.07 of its potential returns per unit of risk. Yageo Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 46,250 in Yageo Corp on September 14, 2024 and sell it today you would earn a total of 6,350 from holding Yageo Corp or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Yageo Corp
Performance |
| Timeline |
| Cathay Financial Holding |
| Yageo Corp |
Cathay Financial and Yageo Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Yageo Corp
The main advantage of trading using opposite Cathay Financial and Yageo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Yageo Corp 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 Yageo Corp will offset losses from the drop in Yageo Corp's long position.| Cathay Financial vs. Alchip Technologies | Cathay Financial vs. Materials Analysis Technology | Cathay Financial vs. Microtips Technology | Cathay Financial vs. Sun Max Tech |
| Yageo Corp vs. ESUN Financial Holding | Yageo Corp vs. Wei Chuan Foods | Yageo Corp vs. Cathay Financial Holding | Yageo Corp vs. Tai Tung Communication |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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