Correlation Between Taiwan Cooperative and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Cooperative 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 Taiwan Cooperative and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cooperative Financial and Cathay Financial Holding, you can compare the effects of market volatilities on Taiwan Cooperative 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 Taiwan Cooperative with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cooperative and Cathay Financial.
Diversification Opportunities for Taiwan Cooperative and Cathay Financial
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and Cathay is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cooperative Financial 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 Taiwan Cooperative 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 Taiwan Cooperative Financial 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 Taiwan Cooperative i.e., Taiwan Cooperative and Cathay Financial go up and down completely randomly.
Pair Corralation between Taiwan Cooperative and Cathay Financial
Assuming the 90 days trading horizon Taiwan Cooperative Financial is expected to under-perform the Cathay Financial. In addition to that, Taiwan Cooperative is 2.59 times more volatile than Cathay Financial Holding. It trades about -0.11 of its total potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.16 per unit of volatility. If you would invest 5,940 in Cathay Financial Holding on August 29, 2024 and sell it today you would earn a total of 50.00 from holding Cathay Financial Holding or generate 0.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cooperative Financial vs. Cathay Financial Holding
Performance |
| Timeline |
| Taiwan Cooperative |
| Cathay Financial Holding |
Taiwan Cooperative and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cooperative and Cathay Financial
The main advantage of trading using opposite Taiwan Cooperative and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cooperative 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.| Taiwan Cooperative vs. Taiwan Secom Co | Taiwan Cooperative vs. TTET Union Corp | Taiwan Cooperative vs. China Steel Chemical | Taiwan Cooperative vs. Taiwan Shin Kong |
| Cathay Financial vs. Compal Broadband Networks | Cathay Financial vs. Excellence Optoelectronic | Cathay Financial vs. Top Union Electronics | Cathay Financial vs. ABC Taiwan Electronics |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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