Correlation Between Far EasTone and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Far EasTone 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 Far EasTone and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Far EasTone Telecommunications and Cathay Financial Holding, you can compare the effects of market volatilities on Far EasTone 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 Far EasTone with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far EasTone and Cathay Financial.
Diversification Opportunities for Far EasTone and Cathay Financial
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Far and Cathay is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Far EasTone Telecommunications 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 Far EasTone 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 Far EasTone Telecommunications 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 Far EasTone i.e., Far EasTone and Cathay Financial go up and down completely randomly.
Pair Corralation between Far EasTone and Cathay Financial
Assuming the 90 days trading horizon Far EasTone Telecommunications is expected to generate 9.4 times more return on investment than Cathay Financial. However, Far EasTone is 9.4 times more volatile than Cathay Financial Holding. It trades about 0.08 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 8,940 in Far EasTone Telecommunications on August 28, 2024 and sell it today you would earn a total of 160.00 from holding Far EasTone Telecommunications or generate 1.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Far EasTone Telecommunications vs. Cathay Financial Holding
Performance |
| Timeline |
| Far EasTone Telecomm |
| Cathay Financial Holding |
Far EasTone and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Far EasTone and Cathay Financial
The main advantage of trading using opposite Far EasTone and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far EasTone 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.| Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. CTBC Financial Holding | Far EasTone vs. Fubon Financial Holding | Far EasTone vs. President Chain Store |
| Cathay Financial vs. Mechema Chemicals Int | Cathay Financial vs. Hsinli Chemical Industrial | Cathay Financial vs. Evermore Chemical Industry | Cathay Financial vs. Landis Taipei Hotel |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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