Correlation Between Cathay Financial and Deltamac Taiwan
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Deltamac Taiwan 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 Deltamac Taiwan 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 Deltamac Taiwan Co, you can compare the effects of market volatilities on Cathay Financial and Deltamac Taiwan 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 Deltamac Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Deltamac Taiwan.
Diversification Opportunities for Cathay Financial and Deltamac Taiwan
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Deltamac is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Deltamac Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deltamac Taiwan 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 Deltamac Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deltamac Taiwan has no effect on the direction of Cathay Financial i.e., Cathay Financial and Deltamac Taiwan go up and down completely randomly.
Pair Corralation between Cathay Financial and Deltamac Taiwan
Assuming the 90 days trading horizon Cathay Financial is expected to generate 17.1 times less return on investment than Deltamac Taiwan. But when comparing it to its historical volatility, Cathay Financial Holding is 13.51 times less risky than Deltamac Taiwan. It trades about 0.06 of its potential returns per unit of risk. Deltamac Taiwan Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,560 in Deltamac Taiwan Co on August 30, 2024 and sell it today you would earn a total of 3,560 from holding Deltamac Taiwan Co or generate 228.21% 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. Deltamac Taiwan Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Deltamac Taiwan |
Cathay Financial and Deltamac Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Deltamac Taiwan
The main advantage of trading using opposite Cathay Financial and Deltamac Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Deltamac Taiwan 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 Deltamac Taiwan will offset losses from the drop in Deltamac Taiwan's long position.| Cathay Financial vs. Compal Broadband Networks | Cathay Financial vs. Excellence Optoelectronic | Cathay Financial vs. Top Union Electronics | Cathay Financial vs. ABC Taiwan Electronics |
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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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