Correlation Between Holiday Entertainment and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Holiday Entertainment 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 Holiday Entertainment and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holiday Entertainment Co and Cathay Financial Holding, you can compare the effects of market volatilities on Holiday Entertainment 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 Holiday Entertainment with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holiday Entertainment and Cathay Financial.
Diversification Opportunities for Holiday Entertainment and Cathay Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Holiday and Cathay is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Holiday Entertainment Co 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 Holiday Entertainment 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 Holiday Entertainment Co 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 Holiday Entertainment i.e., Holiday Entertainment and Cathay Financial go up and down completely randomly.
Pair Corralation between Holiday Entertainment and Cathay Financial
Assuming the 90 days trading horizon Holiday Entertainment Co is expected to generate 3.4 times more return on investment than Cathay Financial. However, Holiday Entertainment is 3.4 times more volatile than Cathay Financial Holding. It trades about 0.05 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.06 per unit of risk. If you would invest 7,950 in Holiday Entertainment Co on December 3, 2024 and sell it today you would earn a total of 100.00 from holding Holiday Entertainment Co or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.25% |
| Values | Daily Returns |
Holiday Entertainment Co vs. Cathay Financial Holding
Performance |
| Timeline |
| Holiday Entertainment |
| Cathay Financial Holding |
Holiday Entertainment and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holiday Entertainment and Cathay Financial
The main advantage of trading using opposite Holiday Entertainment and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holiday Entertainment 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.| Holiday Entertainment vs. Yulon Finance Corp | Holiday Entertainment vs. Taiwan Secom Co | Holiday Entertainment vs. Taiwan Shin Kong | Holiday Entertainment vs. Formosa International Hotels |
| Cathay Financial vs. GeneReach Biotechnology | Cathay Financial vs. Ching Feng Home | Cathay Financial vs. China Airlines | Cathay Financial vs. Logah Technology Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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