Correlation Between Daxin Materials and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Daxin Materials 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 Daxin Materials and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daxin Materials Corp and Cathay Financial Holding, you can compare the effects of market volatilities on Daxin Materials 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 Daxin Materials with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daxin Materials and Cathay Financial.
Diversification Opportunities for Daxin Materials and Cathay Financial
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Daxin and Cathay is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Daxin Materials Corp 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 Daxin Materials 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 Daxin Materials Corp 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 Daxin Materials i.e., Daxin Materials and Cathay Financial go up and down completely randomly.
Pair Corralation between Daxin Materials and Cathay Financial
Assuming the 90 days trading horizon Daxin Materials Corp is expected to generate 11.34 times more return on investment than Cathay Financial. However, Daxin Materials is 11.34 times more volatile than Cathay Financial Holding. It trades about 0.07 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.01 per unit of risk. If you would invest 10,200 in Daxin Materials Corp on September 2, 2024 and sell it today you would earn a total of 10,250 from holding Daxin Materials Corp or generate 100.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daxin Materials Corp vs. Cathay Financial Holding
Performance |
| Timeline |
| Daxin Materials Corp |
| Cathay Financial Holding |
Daxin Materials and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daxin Materials and Cathay Financial
The main advantage of trading using opposite Daxin Materials and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daxin Materials 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.| Daxin Materials vs. Topco Scientific Co | Daxin Materials vs. Holtek Semiconductor | Daxin Materials vs. Greatek Electronics | Daxin Materials vs. Stark Technology |
| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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