Correlation Between Cathay Financial and Merry Electronics
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Merry Electronics 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 Merry Electronics 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 Merry Electronics Co, you can compare the effects of market volatilities on Cathay Financial and Merry Electronics 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 Merry Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Merry Electronics.
Diversification Opportunities for Cathay Financial and Merry Electronics
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Merry is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Merry Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merry Electronics 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 Merry Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merry Electronics has no effect on the direction of Cathay Financial i.e., Cathay Financial and Merry Electronics go up and down completely randomly.
Pair Corralation between Cathay Financial and Merry Electronics
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.12 times more return on investment than Merry Electronics. However, Cathay Financial Holding is 8.35 times less risky than Merry Electronics. It trades about 0.16 of its potential returns per unit of risk. Merry Electronics Co is currently generating about -0.06 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Merry Electronics Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Merry Electronics |
Cathay Financial and Merry Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Merry Electronics
The main advantage of trading using opposite Cathay Financial and Merry Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Merry Electronics 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 Merry Electronics will offset losses from the drop in Merry Electronics' 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 |
| Merry Electronics vs. Chung Hwa Food | Merry Electronics vs. Oceanic Beverages Co | Merry Electronics vs. Alchip Technologies | Merry Electronics vs. United Radiant Technology |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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