Correlation Between Cathay Financial and Far Eastern
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Far Eastern 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 Far Eastern 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 Far Eastern International, you can compare the effects of market volatilities on Cathay Financial and Far Eastern 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 Far Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Far Eastern.
Diversification Opportunities for Cathay Financial and Far Eastern
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Far is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Far Eastern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern International 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 Far Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far Eastern International has no effect on the direction of Cathay Financial i.e., Cathay Financial and Far Eastern go up and down completely randomly.
Pair Corralation between Cathay Financial and Far Eastern
Assuming the 90 days trading horizon Cathay Financial is expected to generate 143.0 times less return on investment than Far Eastern. But when comparing it to its historical volatility, Cathay Financial Holding is 4.05 times less risky than Far Eastern. It trades about 0.0 of its potential returns per unit of risk. Far Eastern International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,120 in Far Eastern International on August 29, 2024 and sell it today you would earn a total of 240.00 from holding Far Eastern International or generate 21.43% 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. Far Eastern International
Performance |
| Timeline |
| Cathay Financial Holding |
| Far Eastern International |
Cathay Financial and Far Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Far Eastern
The main advantage of trading using opposite Cathay Financial and Far Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Far Eastern 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 Far Eastern will offset losses from the drop in Far Eastern'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 |
| Far Eastern vs. Chang Hwa Commercial | Far Eastern vs. Taiwan Business Bank | Far Eastern vs. Sinopac Financial Holdings | Far Eastern vs. Taichung Commercial Bank |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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