Correlation Between PlayNitride and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both PlayNitride 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 PlayNitride and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PlayNitride and Cathay Financial Holding, you can compare the effects of market volatilities on PlayNitride 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 PlayNitride with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of PlayNitride and Cathay Financial.
Diversification Opportunities for PlayNitride and Cathay Financial
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PlayNitride and Cathay is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PlayNitride 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 PlayNitride 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 PlayNitride 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 PlayNitride i.e., PlayNitride and Cathay Financial go up and down completely randomly.
Pair Corralation between PlayNitride and Cathay Financial
Assuming the 90 days trading horizon PlayNitride is expected to generate 6.51 times more return on investment than Cathay Financial. However, PlayNitride is 6.51 times more volatile than Cathay Financial Holding. It trades about 0.14 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.02 per unit of risk. If you would invest 7,930 in PlayNitride on August 29, 2024 and sell it today you would earn a total of 6,070 from holding PlayNitride or generate 76.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PlayNitride vs. Cathay Financial Holding
Performance |
| Timeline |
| PlayNitride |
| Cathay Financial Holding |
PlayNitride and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PlayNitride and Cathay Financial
The main advantage of trading using opposite PlayNitride and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PlayNitride 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.| PlayNitride vs. Taiwan Semiconductor Manufacturing | PlayNitride vs. Hon Hai Precision | PlayNitride vs. MediaTek | PlayNitride vs. Chunghwa Telecom Co |
| Cathay Financial vs. Arbor Technology | Cathay Financial vs. Chicony Power Technology | Cathay Financial vs. STL Technology Co | Cathay Financial vs. Formosa International Hotels |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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