Correlation Between Alchip Technologies and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Alchip Technologies 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 Alchip Technologies and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alchip Technologies and Cathay Financial Holding, you can compare the effects of market volatilities on Alchip Technologies 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 Alchip Technologies with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alchip Technologies and Cathay Financial.
Diversification Opportunities for Alchip Technologies and Cathay Financial
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Alchip and Cathay is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Alchip Technologies 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 Alchip Technologies 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 Alchip Technologies 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 Alchip Technologies i.e., Alchip Technologies and Cathay Financial go up and down completely randomly.
Pair Corralation between Alchip Technologies and Cathay Financial
Assuming the 90 days trading horizon Alchip Technologies is expected to generate 11.98 times more return on investment than Cathay Financial. However, Alchip Technologies is 11.98 times more volatile than Cathay Financial Holding. It trades about 0.09 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.07 per unit of risk. If you would invest 78,100 in Alchip Technologies on September 14, 2024 and sell it today you would earn a total of 196,400 from holding Alchip Technologies or generate 251.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alchip Technologies vs. Cathay Financial Holding
Performance |
| Timeline |
| Alchip Technologies |
| Cathay Financial Holding |
Alchip Technologies and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alchip Technologies and Cathay Financial
The main advantage of trading using opposite Alchip Technologies and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alchip Technologies 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.| Alchip Technologies vs. WIN Semiconductors | Alchip Technologies vs. GlobalWafers Co | Alchip Technologies vs. Novatek Microelectronics Corp | Alchip Technologies vs. Ruentex Development Co |
| Cathay Financial vs. Alchip Technologies | Cathay Financial vs. Materials Analysis Technology | Cathay Financial vs. Microtips Technology | Cathay Financial vs. Sun Max Tech |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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