Correlation Between Cathay Financial and Longwell
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Longwell 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 Longwell 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 Longwell Co, you can compare the effects of market volatilities on Cathay Financial and Longwell 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 Longwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Longwell.
Diversification Opportunities for Cathay Financial and Longwell
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Longwell is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Longwell Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longwell 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 Longwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longwell has no effect on the direction of Cathay Financial i.e., Cathay Financial and Longwell go up and down completely randomly.
Pair Corralation between Cathay Financial and Longwell
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.11 times more return on investment than Longwell. However, Cathay Financial Holding is 9.21 times less risky than Longwell. It trades about 0.32 of its potential returns per unit of risk. Longwell Co is currently generating about -0.17 per unit of risk. If you would invest 5,910 in Cathay Financial Holding on September 3, 2024 and sell it today you would earn a total of 90.00 from holding Cathay Financial Holding or generate 1.52% 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. Longwell Co
Performance |
| Timeline |
| Cathay Financial Holding |
| Longwell |
Cathay Financial and Longwell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Longwell
The main advantage of trading using opposite Cathay Financial and Longwell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Longwell 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 Longwell will offset losses from the drop in Longwell's long position.| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
| Longwell vs. Acbel Polytech | Longwell vs. Primax Electronics | Longwell vs. Flexium Interconnect | Longwell vs. Career Technology MFG |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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