Correlation Between Cathay Financial and Asia Electronic

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

Diversification Opportunities for Cathay Financial and Asia Electronic

-0.22

Correlation Coefficient

Cathay Financial  Asia Electronic

Very good diversification

The 3 months correlation between Cathay and Asia is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Asia Electronic Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Electronic Material 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 Asia Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Electronic Material has no effect on the direction of Cathay Financial i.e., Cathay Financial and Asia Electronic go up and down completely randomly.

Pair Corralation between Cathay Financial and Asia Electronic

Assuming the 90 days trading horizon Cathay Financial is expected to generate 1.27 times less return on investment than Asia Electronic. But when comparing it to its historical volatility, Cathay Financial Holding is 6.71 times less risky than Asia Electronic. It trades about 0.19 of its potential returns per unit of risk. Asia Electronic Material is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,075  in Asia Electronic Material on September 5, 2024 and sell it today you would earn a total of  15.00  from holding Asia Electronic Material or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cathay Financial Holding  vs.  Asia Electronic Material

Cathay Financial Holding

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 12 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Asia Electronic Material

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Electronic Material are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Asia Electronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cathay Financial and Asia Electronic

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

The idea behind Cathay Financial Holding and Asia Electronic Material 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.