Correlation Between CTBC Financial and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Cathay Financial 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 CTBC Financial and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTBC Financial Holding and Cathay Financial Holding, you can compare the effects of market volatilities on CTBC Financial and Cathay Financial 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 CTBC Financial with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Cathay Financial.
Diversification Opportunities for CTBC Financial and Cathay Financial
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CTBC and Cathay is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding and CTBC 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 CTBC Financial Holding are associated (or correlated) with Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of CTBC Financial i.e., CTBC Financial and Cathay Financial go up and down completely randomly.
Pair Corralation between CTBC Financial and Cathay Financial
Assuming the 90 days trading horizon CTBC Financial Holding is expected to under-perform the Cathay Financial. But the stock apears to be less risky and, when comparing its historical volatility, CTBC Financial Holding is 2.12 times less risky than Cathay Financial. The stock trades about -0.02 of its potential returns per unit of risk. The Cathay Financial Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6,070 in Cathay Financial Holding on August 30, 2024 and sell it today you would earn a total of 50.00 from holding Cathay Financial Holding or generate 0.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CTBC Financial Holding vs. Cathay Financial Holding
Performance |
Timeline |
CTBC Financial Holding |
Cathay Financial Holding |
CTBC Financial and Cathay Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CTBC Financial and Cathay Financial
The main advantage of trading using opposite CTBC Financial and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Cathay Financial 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 Cathay Financial will offset losses from the drop in Cathay Financial's long position.CTBC Financial vs. Jinan Acetate Chemical | CTBC Financial vs. Grand Pacific Petrochemical | CTBC Financial vs. Shiny Chemical Industrial | CTBC Financial vs. Oceanic Beverages Co |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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