Correlation Between Cathay Financial and Orient Pharma
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Orient Pharma 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 Orient Pharma 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 Orient Pharma Co, you can compare the effects of market volatilities on Cathay Financial and Orient Pharma 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 Orient Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Orient Pharma.
Diversification Opportunities for Cathay Financial and Orient Pharma
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Orient is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Orient Pharma Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Pharma 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 Orient Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Pharma has no effect on the direction of Cathay Financial i.e., Cathay Financial and Orient Pharma go up and down completely randomly.
Pair Corralation between Cathay Financial and Orient Pharma
Assuming the 90 days trading horizon Cathay Financial is expected to generate 7.52 times less return on investment than Orient Pharma. But when comparing it to its historical volatility, Cathay Financial Holding is 16.78 times less risky than Orient Pharma. It trades about 0.33 of its potential returns per unit of risk. Orient Pharma Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,605 in Orient Pharma Co on September 12, 2024 and sell it today you would earn a total of 1,090 from holding Orient Pharma Co or generate 41.84% 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. Orient Pharma Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Orient Pharma |
Cathay Financial and Orient Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Orient Pharma
The main advantage of trading using opposite Cathay Financial and Orient Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Orient Pharma 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 Orient Pharma will offset losses from the drop in Orient Pharma'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 |
| Orient Pharma vs. Asustek Computer | Orient Pharma vs. Arima Communications Corp | Orient Pharma vs. Wonderful Hi Tech Co | Orient Pharma vs. Dimension Computer Technology |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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