Correlation Between Cathay Financial and PChome Online
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and PChome Online 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 PChome Online 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 PChome Online, you can compare the effects of market volatilities on Cathay Financial and PChome Online 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 PChome Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and PChome Online.
Diversification Opportunities for Cathay Financial and PChome Online
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and PChome is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and PChome Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PChome Online 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 PChome Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PChome Online has no effect on the direction of Cathay Financial i.e., Cathay Financial and PChome Online go up and down completely randomly.
Pair Corralation between Cathay Financial and PChome Online
Assuming the 90 days trading horizon Cathay Financial is expected to generate 14.43 times less return on investment than PChome Online. But when comparing it to its historical volatility, Cathay Financial Holding is 8.79 times less risky than PChome Online. It trades about 0.01 of its potential returns per unit of risk. PChome Online is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5,214 in PChome Online on September 1, 2024 and sell it today you would lose (14.00) from holding PChome Online or give up 0.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. PChome Online
Performance |
| Timeline |
| Cathay Financial Holding |
| PChome Online |
Cathay Financial and PChome Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and PChome Online
The main advantage of trading using opposite Cathay Financial and PChome Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, PChome Online 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 PChome Online will offset losses from the drop in PChome Online's long position.| Cathay Financial vs. MedFirst Healthcare Services | Cathay Financial vs. Great China Metal | Cathay Financial vs. Chernan Metal Industrial | Cathay Financial vs. Simple Mart Retail |
| PChome Online vs. momo Inc | PChome Online vs. President Chain Store | PChome Online vs. Uni President Enterprises Corp | PChome Online vs. Taiwan FamilyMart Co |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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