Correlation Between Cathay Financial and Sunfon Construction
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Sunfon Construction 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 Sunfon Construction 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 Sunfon Construction Co, you can compare the effects of market volatilities on Cathay Financial and Sunfon Construction 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 Sunfon Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Sunfon Construction.
Diversification Opportunities for Cathay Financial and Sunfon Construction
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Sunfon is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Sunfon Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunfon Construction 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 Sunfon Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunfon Construction has no effect on the direction of Cathay Financial i.e., Cathay Financial and Sunfon Construction go up and down completely randomly.
Pair Corralation between Cathay Financial and Sunfon Construction
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.24 times more return on investment than Sunfon Construction. However, Cathay Financial Holding is 4.14 times less risky than Sunfon Construction. It trades about 0.04 of its potential returns per unit of risk. Sunfon Construction Co is currently generating about -0.05 per unit of risk. If you would invest 5,940 in Cathay Financial Holding on November 28, 2024 and sell it today you would earn a total of 130.00 from holding Cathay Financial Holding or generate 2.19% 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. Sunfon Construction Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Sunfon Construction |
Cathay Financial and Sunfon Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Sunfon Construction
The main advantage of trading using opposite Cathay Financial and Sunfon Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Sunfon Construction 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 Sunfon Construction will offset losses from the drop in Sunfon Construction's long position.| Cathay Financial vs. Mechema Chemicals Int | Cathay Financial vs. Jinan Acetate Chemical | Cathay Financial vs. Double Bond Chemical | Cathay Financial vs. Standard Chemical Pharmaceutical |
| Sunfon Construction vs. Winstek Semiconductor Co | Sunfon Construction vs. Weltrend Semiconductor | Sunfon Construction vs. China Metal Products | Sunfon Construction vs. Orient Semiconductor Electronics |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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