Correlation Between Cathay Chemical and Ta Ya

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Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and Ta Ya 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 Cathay Chemical and Ta Ya into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Chemical Works and Ta Ya Electric, you can compare the effects of market volatilities on Cathay Chemical and Ta Ya 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 Cathay Chemical with a short position of Ta Ya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and Ta Ya.

Diversification Opportunities for Cathay Chemical and Ta Ya

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cathay and 1609 is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and Ta Ya Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ta Ya Electric and Cathay Chemical 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 Cathay Chemical Works are associated (or correlated) with Ta Ya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ta Ya Electric has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and Ta Ya go up and down completely randomly.

Pair Corralation between Cathay Chemical and Ta Ya

Assuming the 90 days trading horizon Cathay Chemical Works is expected to generate 0.54 times more return on investment than Ta Ya. However, Cathay Chemical Works is 1.86 times less risky than Ta Ya. It trades about -0.14 of its potential returns per unit of risk. Ta Ya Electric is currently generating about -0.17 per unit of risk. If you would invest  4,785  in Cathay Chemical Works on September 16, 2024 and sell it today you would lose (120.00) from holding Cathay Chemical Works or give up 2.51% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Cathay Chemical Works  vs.  Ta Ya Electric

 Performance 
       Timeline  
Cathay Chemical Works 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cathay Chemical Works has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
Ta Ya Electric 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ta Ya Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cathay Chemical and Ta Ya Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cathay Chemical and Ta Ya

The main advantage of trading using opposite Cathay Chemical and Ta Ya positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, Ta Ya 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 Ta Ya will offset losses from the drop in Ta Ya's long position.
The idea behind Cathay Chemical Works and Ta Ya Electric pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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