Correlation Between Pacific Construction and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Pacific Construction 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 Pacific Construction and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Construction Co and Cathay Financial Holding, you can compare the effects of market volatilities on Pacific Construction 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 Pacific Construction with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Construction and Cathay Financial.
Diversification Opportunities for Pacific Construction and Cathay Financial
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pacific and Cathay is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Construction 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 Pacific Construction 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 Pacific Construction 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 Pacific Construction i.e., Pacific Construction and Cathay Financial go up and down completely randomly.
Pair Corralation between Pacific Construction and Cathay Financial
Assuming the 90 days trading horizon Pacific Construction is expected to generate 1.73 times less return on investment than Cathay Financial. In addition to that, Pacific Construction is 1.39 times more volatile than Cathay Financial Holding. It trades about 0.03 of its total potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.07 per unit of volatility. If you would invest 4,347 in Cathay Financial Holding on June 23, 2024 and sell it today you would earn a total of 2,133 from holding Cathay Financial Holding or generate 49.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Pacific Construction Co vs. Cathay Financial Holding
Performance |
Timeline |
Pacific Construction |
Cathay Financial Holding |
Pacific Construction and Cathay Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Pacific Construction and Cathay Financial
The main advantage of trading using opposite Pacific Construction and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Construction 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.Pacific Construction vs. Advancetek Enterprise Co | Pacific Construction vs. De Licacy Industrial | Pacific Construction vs. Shinkong Synthetic Fiber | Pacific Construction vs. Ruentex Development Co |
Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. CTBC Financial Holding | Cathay Financial vs. Mega Financial Holding | Cathay Financial vs. First Financial Holding |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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