Correlation Between Cathay Financial and Alcor Micro
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Alcor Micro 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 Alcor Micro 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 Alcor Micro, you can compare the effects of market volatilities on Cathay Financial and Alcor Micro 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 Alcor Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Alcor Micro.
Diversification Opportunities for Cathay Financial and Alcor Micro
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Alcor is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Alcor Micro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcor Micro 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 Alcor Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcor Micro has no effect on the direction of Cathay Financial i.e., Cathay Financial and Alcor Micro go up and down completely randomly.
Pair Corralation between Cathay Financial and Alcor Micro
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.1 times more return on investment than Alcor Micro. However, Cathay Financial Holding is 10.13 times less risky than Alcor Micro. It trades about 0.34 of its potential returns per unit of risk. Alcor Micro is currently generating about 0.03 per unit of risk. If you would invest 5,660 in Cathay Financial Holding on September 12, 2024 and sell it today you would earn a total of 340.00 from holding Cathay Financial Holding or generate 6.01% 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. Alcor Micro
Performance |
| Timeline |
| Cathay Financial Holding |
| Alcor Micro |
Cathay Financial and Alcor Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Alcor Micro
The main advantage of trading using opposite Cathay Financial and Alcor Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Alcor Micro 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 Alcor Micro will offset losses from the drop in Alcor Micro'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 |
| Alcor Micro vs. Shinkong Insurance Co | Alcor Micro vs. Power Wind Health | Alcor Micro vs. Fubon Financial Holding | Alcor Micro vs. SS Healthcare Holding |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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