Correlation Between Cathay Financial and Tingyi Holding
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Tingyi Holding 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 Financial and Tingyi Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Financial Holding and Tingyi Holding Corp, you can compare the effects of market volatilities on Cathay Financial and Tingyi Holding 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 Financial with a short position of Tingyi Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Tingyi Holding.
Diversification Opportunities for Cathay Financial and Tingyi Holding
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Tingyi is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Tingyi Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tingyi Holding Corp and Cathay Financial 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 Financial Holding are associated (or correlated) with Tingyi Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tingyi Holding Corp has no effect on the direction of Cathay Financial i.e., Cathay Financial and Tingyi Holding go up and down completely randomly.
Pair Corralation between Cathay Financial and Tingyi Holding
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.63 times more return on investment than Tingyi Holding. However, Cathay Financial Holding is 1.59 times less risky than Tingyi Holding. It trades about 0.13 of its potential returns per unit of risk. Tingyi Holding Corp is currently generating about 0.02 per unit of risk. If you would invest 6,290 in Cathay Financial Holding on September 12, 2024 and sell it today you would earn a total of 570.00 from holding Cathay Financial Holding or generate 9.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Cathay Financial Holding vs. Tingyi Holding Corp
Performance |
Timeline |
Cathay Financial Holding |
Tingyi Holding Corp |
Cathay Financial and Tingyi Holding Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cathay Financial and Tingyi Holding
The main advantage of trading using opposite Cathay Financial and Tingyi Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Tingyi Holding 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 Tingyi Holding will offset losses from the drop in Tingyi Holding's long position.Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mega Financial Holding | Cathay Financial vs. First Financial Holding |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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