Correlation Between Ching Feng and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Ching Feng 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 Ching Feng and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ching Feng Home and Cathay Financial Holding, you can compare the effects of market volatilities on Ching Feng 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 Ching Feng with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ching Feng and Cathay Financial.
Diversification Opportunities for Ching Feng and Cathay Financial
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ching and Cathay is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ching Feng Home 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 Ching Feng 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 Ching Feng Home 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 Ching Feng i.e., Ching Feng and Cathay Financial go up and down completely randomly.
Pair Corralation between Ching Feng and Cathay Financial
Assuming the 90 days trading horizon Ching Feng Home is expected to generate 5.82 times more return on investment than Cathay Financial. However, Ching Feng is 5.82 times more volatile than Cathay Financial Holding. It trades about 0.07 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 1,935 in Ching Feng Home on September 2, 2024 and sell it today you would earn a total of 1,155 from holding Ching Feng Home or generate 59.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ching Feng Home vs. Cathay Financial Holding
Performance |
| Timeline |
| Ching Feng Home |
| Cathay Financial Holding |
Ching Feng and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ching Feng and Cathay Financial
The main advantage of trading using opposite Ching Feng and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ching Feng 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.| Ching Feng vs. Globe Union Industrial | Ching Feng vs. Taiwan Fu Hsing | Ching Feng vs. Taiwan Hon Chuan | Ching Feng vs. Feng Tay Enterprises |
| Cathay Financial vs. Sunfar Computer Co | Cathay Financial vs. Li Kang Biomedical | Cathay Financial vs. Elitegroup Computer Systems | Cathay Financial vs. Cowealth Medical Holding |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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