Correlation Between Cathay Financial and TPK Holding
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and TPK Holding 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 TPK Holding 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 TPK Holding Co, you can compare the effects of market volatilities on Cathay Financial and TPK Holding 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 TPK Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and TPK Holding.
Diversification Opportunities for Cathay Financial and TPK Holding
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and TPK is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and TPK Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TPK Holding 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 TPK Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TPK Holding has no effect on the direction of Cathay Financial i.e., Cathay Financial and TPK Holding go up and down completely randomly.
Pair Corralation between Cathay Financial and TPK Holding
Assuming the 90 days trading horizon Cathay Financial is expected to generate 12.22 times less return on investment than TPK Holding. But when comparing it to its historical volatility, Cathay Financial Holding is 7.06 times less risky than TPK Holding. It trades about 0.03 of its potential returns per unit of risk. TPK Holding Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,730 in TPK Holding Co on September 3, 2024 and sell it today you would earn a total of 415.00 from holding TPK Holding Co or generate 11.13% 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. TPK Holding Co
Performance |
| Timeline |
| Cathay Financial Holding |
| TPK Holding |
Cathay Financial and TPK Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and TPK Holding
The main advantage of trading using opposite Cathay Financial and TPK Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, TPK Holding 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 TPK Holding will offset losses from the drop in TPK Holding's long position.| Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance | Cathay Financial vs. Mercuries Associates Holding |
| TPK Holding vs. Catcher Technology Co | TPK Holding vs. Innolux Corp | TPK Holding vs. LARGAN Precision Co | TPK Holding vs. Pegatron Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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