Correlation Between Cathay Financial and Softstar Entertainment
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Softstar Entertainment 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 Softstar Entertainment 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 Softstar Entertainment, you can compare the effects of market volatilities on Cathay Financial and Softstar Entertainment 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 Softstar Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Softstar Entertainment.
Diversification Opportunities for Cathay Financial and Softstar Entertainment
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Softstar is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Softstar Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softstar Entertainment 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 Softstar Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softstar Entertainment has no effect on the direction of Cathay Financial i.e., Cathay Financial and Softstar Entertainment go up and down completely randomly.
Pair Corralation between Cathay Financial and Softstar Entertainment
Assuming the 90 days trading horizon Cathay Financial is expected to generate 9.17 times less return on investment than Softstar Entertainment. But when comparing it to its historical volatility, Cathay Financial Holding is 28.57 times less risky than Softstar Entertainment. It trades about 0.24 of its potential returns per unit of risk. Softstar Entertainment is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,650 in Softstar Entertainment on October 29, 2024 and sell it today you would earn a total of 150.00 from holding Softstar Entertainment or generate 2.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Softstar Entertainment
Performance |
| Timeline |
| Cathay Financial Holding |
| Softstar Entertainment |
Cathay Financial and Softstar Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Softstar Entertainment
The main advantage of trading using opposite Cathay Financial and Softstar Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Softstar Entertainment 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 Softstar Entertainment will offset losses from the drop in Softstar Entertainment's long position.| Cathay Financial vs. Tong Hwa Synthetic Fiber | Cathay Financial vs. Taiwan Speciality Chemicals | Cathay Financial vs. Standard Chemical Pharmaceutical | Cathay Financial vs. Far EasTone Telecommunications |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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