Correlation Between Asmedia Technology and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Asmedia 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 Asmedia 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 Asmedia Technology and Cathay Financial Holding, you can compare the effects of market volatilities on Asmedia 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 Asmedia Technology with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asmedia Technology and Cathay Financial.
Diversification Opportunities for Asmedia Technology and Cathay Financial
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Asmedia and Cathay is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology 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 Asmedia 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 Asmedia Technology 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 Asmedia Technology i.e., Asmedia Technology and Cathay Financial go up and down completely randomly.
Pair Corralation between Asmedia Technology and Cathay Financial
Assuming the 90 days trading horizon Asmedia Technology is expected to generate 31.92 times more return on investment than Cathay Financial. However, Asmedia Technology is 31.92 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 0.3 per unit of risk. If you would invest 200,000 in Asmedia Technology on October 25, 2024 and sell it today you would earn a total of 7,000 from holding Asmedia Technology or generate 3.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Asmedia Technology vs. Cathay Financial Holding
Performance |
| Timeline |
| Asmedia Technology |
| Cathay Financial Holding |
Asmedia Technology and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Asmedia Technology and Cathay Financial
The main advantage of trading using opposite Asmedia Technology and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asmedia 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.| Asmedia Technology vs. Alchip Technologies | Asmedia Technology vs. Aspeed Technology | Asmedia Technology vs. Silergy Corp | Asmedia Technology vs. Global Unichip Corp |
| Cathay Financial vs. X Legend Entertainment Co | Cathay Financial vs. Excellence Optoelectronic | Cathay Financial vs. Li Kang Biomedical | Cathay Financial vs. Asmedia Technology |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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