Correlation Between Cathay Financial and WiseChip Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and WiseChip Semiconductor 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 WiseChip Semiconductor 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 WiseChip Semiconductor, you can compare the effects of market volatilities on Cathay Financial and WiseChip Semiconductor 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 WiseChip Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and WiseChip Semiconductor.
Diversification Opportunities for Cathay Financial and WiseChip Semiconductor
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and WiseChip is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and WiseChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WiseChip Semiconductor 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 WiseChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WiseChip Semiconductor has no effect on the direction of Cathay Financial i.e., Cathay Financial and WiseChip Semiconductor go up and down completely randomly.
Pair Corralation between Cathay Financial and WiseChip Semiconductor
Assuming the 90 days trading horizon Cathay Financial is expected to generate 2.79 times less return on investment than WiseChip Semiconductor. But when comparing it to its historical volatility, Cathay Financial Holding is 6.56 times less risky than WiseChip Semiconductor. It trades about 0.03 of its potential returns per unit of risk. WiseChip Semiconductor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,310 in WiseChip Semiconductor on September 3, 2024 and sell it today you would earn a total of 15.00 from holding WiseChip Semiconductor or generate 0.45% 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. WiseChip Semiconductor
Performance |
| Timeline |
| Cathay Financial Holding |
| WiseChip Semiconductor |
Cathay Financial and WiseChip Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and WiseChip Semiconductor
The main advantage of trading using opposite Cathay Financial and WiseChip Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, WiseChip Semiconductor 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 WiseChip Semiconductor will offset losses from the drop in WiseChip Semiconductor'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 |
| WiseChip Semiconductor vs. Taiwan Semiconductor Manufacturing | WiseChip Semiconductor vs. Yang Ming Marine | WiseChip Semiconductor vs. ASE Industrial Holding | WiseChip Semiconductor vs. AU Optronics |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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