Correlation Between Cathay Financial and Ta Liang
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ta Liang 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 Ta Liang 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 Ta Liang Technology, you can compare the effects of market volatilities on Cathay Financial and Ta Liang 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 Ta Liang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ta Liang.
Diversification Opportunities for Cathay Financial and Ta Liang
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and 3167 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ta Liang Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Liang Technology 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 Ta Liang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Liang Technology has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ta Liang go up and down completely randomly.
Pair Corralation between Cathay Financial and Ta Liang
Assuming the 90 days trading horizon Cathay Financial is expected to generate 63.45 times less return on investment than Ta Liang. But when comparing it to its historical volatility, Cathay Financial Holding is 11.51 times less risky than Ta Liang. It trades about 0.03 of its potential returns per unit of risk. Ta Liang Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 5,860 in Ta Liang Technology on September 3, 2024 and sell it today you would earn a total of 5,690 from holding Ta Liang Technology or generate 97.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Ta Liang Technology
Performance |
| Timeline |
| Cathay Financial Holding |
| Ta Liang Technology |
Cathay Financial and Ta Liang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Ta Liang
The main advantage of trading using opposite Cathay Financial and Ta Liang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ta Liang 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 Ta Liang will offset losses from the drop in Ta Liang's long position.| Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance | Cathay Financial vs. Mercuries Associates Holding |
| Ta Liang vs. Highlight Tech | Ta Liang vs. WiseChip Semiconductor | Ta Liang vs. Novatek Microelectronics Corp | Ta Liang vs. Leader 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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