Correlation Between Cathay Financial and Shin Ruenn

Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Shin Ruenn 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 Shin Ruenn 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 Shin Ruenn Development, you can compare the effects of market volatilities on Cathay Financial and Shin Ruenn 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 Shin Ruenn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Shin Ruenn.

Diversification Opportunities for Cathay Financial and Shin Ruenn

-0.73

Correlation Coefficient

Cathay Financial  Shin Ruenn

Pay attention - limited upside

The 3 months correlation between Cathay and Shin is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Shin Ruenn Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Ruenn Development 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 Shin Ruenn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Ruenn Development has no effect on the direction of Cathay Financial i.e., Cathay Financial and Shin Ruenn go up and down completely randomly.

Pair Corralation between Cathay Financial and Shin Ruenn

Assuming the 90 days trading horizon Cathay Financial is expected to generate 7.38 times less return on investment than Shin Ruenn. But when comparing it to its historical volatility, Cathay Financial Holding is 7.31 times less risky than Shin Ruenn. It trades about 0.06 of its potential returns per unit of risk. Shin Ruenn Development is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,560  in Shin Ruenn Development on September 21, 2024 and sell it today you would earn a total of  2,550  from holding Shin Ruenn Development or generate 71.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Cathay Financial Holding  vs.  Shin Ruenn Development

Cathay Financial Holding

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Shin Ruenn Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Ruenn Development 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.

Pair Trading with Cathay Financial and Shin Ruenn

The main advantage of trading using opposite Cathay Financial and Shin Ruenn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Shin Ruenn 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 Shin Ruenn will offset losses from the drop in Shin Ruenn's long position.

The idea behind Cathay Financial Holding and Shin Ruenn Development 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.