Correlation Between Adata Technology and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Adata Technology 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 Adata Technology and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adata Technology Co and Cathay Financial Holding, you can compare the effects of market volatilities on Adata Technology 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 Adata Technology with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adata Technology and Cathay Financial.
Diversification Opportunities for Adata Technology and Cathay Financial
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Adata and Cathay is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Adata Technology 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 Adata Technology 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 Adata Technology 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 Adata Technology i.e., Adata Technology and Cathay Financial go up and down completely randomly.
Pair Corralation between Adata Technology and Cathay Financial
Assuming the 90 days trading horizon Adata Technology Co is expected to generate 15.59 times more return on investment than Cathay Financial. However, Adata Technology is 15.59 times more volatile than Cathay Financial Holding. It trades about 0.75 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.33 per unit of risk. If you would invest 7,393 in Adata Technology Co on November 28, 2024 and sell it today you would earn a total of 1,367 from holding Adata Technology Co or generate 18.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adata Technology Co vs. Cathay Financial Holding
Performance |
| Timeline |
| Adata Technology |
| Cathay Financial Holding |
Adata Technology and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adata Technology and Cathay Financial
The main advantage of trading using opposite Adata Technology and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adata Technology 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.| Adata Technology vs. Transcend Information | Adata Technology vs. Phison Electronics | Adata Technology vs. Nanya Technology Corp | Adata Technology vs. Innolux Corp |
| Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Asia Metal Industries | Cathay Financial vs. Sunspring Metal Corp | Cathay Financial vs. Chernan Metal Industrial |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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