Correlation Between Cathay Financial and Gudeng Precision
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Gudeng Precision 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 Gudeng Precision 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 Gudeng Precision Industrial, you can compare the effects of market volatilities on Cathay Financial and Gudeng Precision 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 Gudeng Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Gudeng Precision.
Diversification Opportunities for Cathay Financial and Gudeng Precision
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Gudeng is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Gudeng Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gudeng Precision Ind 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 Gudeng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gudeng Precision Ind has no effect on the direction of Cathay Financial i.e., Cathay Financial and Gudeng Precision go up and down completely randomly.
Pair Corralation between Cathay Financial and Gudeng Precision
Assuming the 90 days trading horizon Cathay Financial Holding is not expected to generate positive returns. However, Cathay Financial Holding is 8.87 times less risky than Gudeng Precision. It waists most of its returns potential to compensate for thr risk taken. Gudeng Precision is generating about 0.03 per unit of risk. If you would invest 41,700 in Gudeng Precision Industrial on September 12, 2024 and sell it today you would earn a total of 9,400 from holding Gudeng Precision Industrial or generate 22.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Gudeng Precision Industrial
Performance |
| Timeline |
| Cathay Financial Holding |
| Gudeng Precision Ind |
Cathay Financial and Gudeng Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Gudeng Precision
The main advantage of trading using opposite Cathay Financial and Gudeng Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Gudeng Precision 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 Gudeng Precision will offset losses from the drop in Gudeng Precision'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 |
| Gudeng Precision vs. Taiwan Semiconductor Manufacturing | Gudeng Precision vs. Hon Hai Precision | Gudeng Precision vs. MediaTek | Gudeng Precision vs. Chunghwa Telecom Co |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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