Correlation Between Cathay Financial and Asustek Computer
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Asustek Computer 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 Asustek Computer 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 Asustek Computer, you can compare the effects of market volatilities on Cathay Financial and Asustek Computer 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 Asustek Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Asustek Computer.
Diversification Opportunities for Cathay Financial and Asustek Computer
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cathay and Asustek is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Asustek Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asustek Computer 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 Asustek Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asustek Computer has no effect on the direction of Cathay Financial i.e., Cathay Financial and Asustek Computer go up and down completely randomly.
Pair Corralation between Cathay Financial and Asustek Computer
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.14 times more return on investment than Asustek Computer. However, Cathay Financial Holding is 7.3 times less risky than Asustek Computer. It trades about 0.16 of its potential returns per unit of risk. Asustek Computer is currently generating about 0.0 per unit of risk. If you would invest 5,940 in Cathay Financial Holding on August 29, 2024 and sell it today you would earn a total of 50.00 from holding Cathay Financial Holding or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Asustek Computer
Performance |
| Timeline |
| Cathay Financial Holding |
| Asustek Computer |
Cathay Financial and Asustek Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Asustek Computer
The main advantage of trading using opposite Cathay Financial and Asustek Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Asustek Computer 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 Asustek Computer will offset losses from the drop in Asustek Computer's long position.| Cathay Financial vs. Compal Broadband Networks | Cathay Financial vs. Excellence Optoelectronic | Cathay Financial vs. Top Union Electronics | Cathay Financial vs. ABC Taiwan Electronics |
| Asustek Computer vs. Quanta Computer | Asustek Computer vs. Acer Inc | Asustek Computer vs. United Microelectronics | Asustek Computer vs. Compal Electronics |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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