Correlation Between Cathay Financial and Excellence Optoelectronic
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Excellence Optoelectronic 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 Excellence Optoelectronic 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 Excellence Optoelectronic, you can compare the effects of market volatilities on Cathay Financial and Excellence Optoelectronic 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 Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Excellence Optoelectronic.
Diversification Opportunities for Cathay Financial and Excellence Optoelectronic
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Excellence is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Cathay Financial i.e., Cathay Financial and Excellence Optoelectronic go up and down completely randomly.
Pair Corralation between Cathay Financial and Excellence Optoelectronic
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.08 times more return on investment than Excellence Optoelectronic. However, Cathay Financial Holding is 12.72 times less risky than Excellence Optoelectronic. It trades about 0.14 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.0 per unit of risk. If you would invest 5,770 in Cathay Financial Holding on October 26, 2024 and sell it today you would earn a total of 250.00 from holding Cathay Financial Holding or generate 4.33% 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. Excellence Optoelectronic
Performance |
| Timeline |
| Cathay Financial Holding |
| Excellence Optoelectronic |
Cathay Financial and Excellence Optoelectronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Excellence Optoelectronic
The main advantage of trading using opposite Cathay Financial and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Excellence Optoelectronic 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 Excellence Optoelectronic will offset losses from the drop in Excellence Optoelectronic's long position.| Cathay Financial vs. Quanta Storage | Cathay Financial vs. Adata Technology Co | Cathay Financial vs. Tong Hwa Synthetic Fiber | Cathay Financial vs. Johnson Chemical Pharmaceutical |
| Excellence Optoelectronic vs. Hota Industrial Mfg | Excellence Optoelectronic vs. BizLink Holding | Excellence Optoelectronic vs. Tong Hsing Electronic | Excellence Optoelectronic vs. SDI Corp |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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