Correlation Between Cathay Financial and Capital Securities
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Capital Securities 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 Capital Securities 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 Capital Securities Corp, you can compare the effects of market volatilities on Cathay Financial and Capital Securities 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 Capital Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Capital Securities.
Diversification Opportunities for Cathay Financial and Capital Securities
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Capital is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp 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 Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Capital Securities go up and down completely randomly.
Pair Corralation between Cathay Financial and Capital Securities
Assuming the 90 days trading horizon Cathay Financial is expected to generate 34.69 times less return on investment than Capital Securities. But when comparing it to its historical volatility, Cathay Financial Holding is 5.83 times less risky than Capital Securities. It trades about 0.01 of its potential returns per unit of risk. Capital Securities Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,535 in Capital Securities Corp on August 26, 2024 and sell it today you would earn a total of 645.00 from holding Capital Securities Corp or generate 42.02% 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. Capital Securities Corp
Performance |
| Timeline |
| Cathay Financial Holding |
| Capital Securities Corp |
Cathay Financial and Capital Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Capital Securities
The main advantage of trading using opposite Cathay Financial and Capital Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Capital Securities 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 Capital Securities will offset losses from the drop in Capital Securities' long position.| Cathay Financial vs. Iron Force Industrial | Cathay Financial vs. Ever Clear Environmental Eng | Cathay Financial vs. Advanced Wireless Semiconductor | Cathay Financial vs. Sinopower Semiconductor |
| Capital Securities vs. President Securities Corp | Capital Securities vs. Yuanta Financial Holdings | Capital Securities vs. Shin Kong Financial | Capital Securities vs. Taishin Financial Holding |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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