Correlation Between Cathay Financial and Chi Sheng
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Chi Sheng 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 Chi Sheng 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 Chi Sheng Chemical, you can compare the effects of market volatilities on Cathay Financial and Chi Sheng 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 Chi Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Chi Sheng.
Diversification Opportunities for Cathay Financial and Chi Sheng
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Chi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Chi Sheng Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Sheng Chemical 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 Chi Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Sheng Chemical has no effect on the direction of Cathay Financial i.e., Cathay Financial and Chi Sheng go up and down completely randomly.
Pair Corralation between Cathay Financial and Chi Sheng
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.16 times more return on investment than Chi Sheng. However, Cathay Financial Holding is 6.29 times less risky than Chi Sheng. It trades about 0.42 of its potential returns per unit of risk. Chi Sheng Chemical is currently generating about -0.02 per unit of risk. If you would invest 6,030 in Cathay Financial Holding on November 29, 2024 and sell it today you would earn a total of 90.00 from holding Cathay Financial Holding or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Cathay Financial Holding vs. Chi Sheng Chemical
Performance |
| Timeline |
| Cathay Financial Holding |
| Chi Sheng Chemical |
Cathay Financial and Chi Sheng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Chi Sheng
The main advantage of trading using opposite Cathay Financial and Chi Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Chi Sheng 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 Chi Sheng will offset losses from the drop in Chi Sheng's long position.| Cathay Financial vs. SynCore Biotechnology Co | Cathay Financial vs. Cameo Communications | Cathay Financial vs. Medigen Biotechnology | Cathay Financial vs. U Media Communications |
| Chi Sheng vs. GeneReach Biotechnology | Chi Sheng vs. Cameo Communications | Chi Sheng vs. Sunspring Metal Corp | Chi Sheng vs. Advanced Wireless Semiconductor |
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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