Correlation Between Taiwan Mobile and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Mobile 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 Taiwan Mobile and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Mobile Co and Cathay Financial Holding, you can compare the effects of market volatilities on Taiwan Mobile 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 Taiwan Mobile with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Mobile and Cathay Financial.
Diversification Opportunities for Taiwan Mobile and Cathay Financial
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Taiwan and Cathay is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Mobile Co 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 Taiwan Mobile 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 Taiwan Mobile Co 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 Taiwan Mobile i.e., Taiwan Mobile and Cathay Financial go up and down completely randomly.
Pair Corralation between Taiwan Mobile and Cathay Financial
Assuming the 90 days trading horizon Taiwan Mobile Co is expected to generate 1.14 times more return on investment than Cathay Financial. However, Taiwan Mobile is 1.14 times more volatile than Cathay Financial Holding. It trades about -0.03 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about -0.16 per unit of risk. If you would invest 11,400 in Taiwan Mobile Co on August 24, 2024 and sell it today you would lose (100.00) from holding Taiwan Mobile Co or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Mobile Co vs. Cathay Financial Holding
Performance |
| Timeline |
| Taiwan Mobile |
| Cathay Financial Holding |
Taiwan Mobile and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Mobile and Cathay Financial
The main advantage of trading using opposite Taiwan Mobile and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Mobile 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.| Taiwan Mobile vs. Chunghwa Telecom Co | Taiwan Mobile vs. Far EasTone Telecommunications | Taiwan Mobile vs. CTBC Financial Holding | Taiwan Mobile vs. Fubon Financial 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |