Correlation Between Cathay Financial and Taiwan Weighted
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Taiwan Weighted 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 Taiwan Weighted 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 Taiwan Weighted, you can compare the effects of market volatilities on Cathay Financial and Taiwan Weighted 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 Taiwan Weighted. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Taiwan Weighted.
Diversification Opportunities for Cathay Financial and Taiwan Weighted
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Taiwan is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Taiwan Weighted in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Weighted 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 Taiwan Weighted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Weighted has no effect on the direction of Cathay Financial i.e., Cathay Financial and Taiwan Weighted go up and down completely randomly.
Pair Corralation between Cathay Financial and Taiwan Weighted
Assuming the 90 days trading horizon Cathay Financial is expected to generate 8.95 times less return on investment than Taiwan Weighted. But when comparing it to its historical volatility, Cathay Financial Holding is 3.67 times less risky than Taiwan Weighted. It trades about 0.03 of its potential returns per unit of risk. Taiwan Weighted is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,549,382 in Taiwan Weighted on October 15, 2024 and sell it today you would earn a total of 751,804 from holding Taiwan Weighted or generate 48.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.76% |
| Values | Daily Returns |
Cathay Financial Holding vs. Taiwan Weighted
Performance |
| Timeline |
Cathay Financial and Taiwan Weighted Volatility Contrast
Predicted Return Density |
| Returns |
Cathay Financial Holding
Pair trading matchups for Cathay Financial
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
Pair Trading with Cathay Financial and Taiwan Weighted
The main advantage of trading using opposite Cathay Financial and Taiwan Weighted positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Taiwan Weighted 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 Taiwan Weighted will offset losses from the drop in Taiwan Weighted's long position.| Cathay Financial vs. AzureWave Technologies | Cathay Financial vs. Microelectronics Technology | Cathay Financial vs. CVC Technologies | Cathay Financial vs. TECO Electric Machinery |
| Taiwan Weighted vs. Chernan Metal Industrial | Taiwan Weighted vs. First Copper Technology | Taiwan Weighted vs. Winstek Semiconductor Co | Taiwan Weighted vs. Sunspring Metal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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