Correlation Between RiTdisplay Corp and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both RiTdisplay Corp 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 RiTdisplay Corp and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RiTdisplay Corp and Cathay Financial Holding, you can compare the effects of market volatilities on RiTdisplay Corp 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 RiTdisplay Corp with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RiTdisplay Corp and Cathay Financial.
Diversification Opportunities for RiTdisplay Corp and Cathay Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RiTdisplay and Cathay is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding RiTdisplay 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 RiTdisplay Corp 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 RiTdisplay 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 RiTdisplay Corp i.e., RiTdisplay Corp and Cathay Financial go up and down completely randomly.
Pair Corralation between RiTdisplay Corp and Cathay Financial
Assuming the 90 days trading horizon RiTdisplay Corp is expected to generate 17.67 times more return on investment than Cathay Financial. However, RiTdisplay Corp is 17.67 times more volatile than Cathay Financial Holding. It trades about 0.23 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.16 per unit of risk. If you would invest 4,660 in RiTdisplay Corp on August 29, 2024 and sell it today you would earn a total of 1,020 from holding RiTdisplay Corp or generate 21.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RiTdisplay Corp vs. Cathay Financial Holding
Performance |
| Timeline |
| RiTdisplay Corp |
| Cathay Financial Holding |
RiTdisplay Corp and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RiTdisplay Corp and Cathay Financial
The main advantage of trading using opposite RiTdisplay Corp and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RiTdisplay Corp 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.| RiTdisplay Corp vs. Hon Hai Precision | RiTdisplay Corp vs. Delta Electronics | RiTdisplay Corp vs. LARGAN Precision Co | RiTdisplay Corp vs. E Ink Holdings |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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