Correlation Between Great Computer and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Great Computer 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 Great Computer and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Computer and Cathay Financial Holding, you can compare the effects of market volatilities on Great Computer 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 Great Computer with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Computer and Cathay Financial.
Diversification Opportunities for Great Computer and Cathay Financial
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Great and Cathay is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer 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 Great Computer 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 Great Computer 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 Great Computer i.e., Great Computer and Cathay Financial go up and down completely randomly.
Pair Corralation between Great Computer and Cathay Financial
Assuming the 90 days trading horizon Great Computer is expected to generate 49.46 times more return on investment than Cathay Financial. However, Great Computer is 49.46 times more volatile than Cathay Financial Holding. It trades about 0.3 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 1,590 in Great Computer on August 28, 2024 and sell it today you would earn a total of 615.00 from holding Great Computer or generate 38.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Great Computer vs. Cathay Financial Holding
Performance |
| Timeline |
| Great Computer |
| Cathay Financial Holding |
Great Computer and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Computer and Cathay Financial
The main advantage of trading using opposite Great Computer and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Computer 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.| Great Computer vs. Airtac International Group | Great Computer vs. TECO Electric Machinery | Great Computer vs. Chung Hsin Electric Machinery | Great Computer vs. King Slide Works |
| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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