Correlation Between Cathay Financial and Ligitek Electronics
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Ligitek Electronics 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 Ligitek Electronics 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 Ligitek Electronics Co, you can compare the effects of market volatilities on Cathay Financial and Ligitek Electronics 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 Ligitek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Ligitek Electronics.
Diversification Opportunities for Cathay Financial and Ligitek Electronics
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Ligitek is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Ligitek Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ligitek Electronics 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 Ligitek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ligitek Electronics has no effect on the direction of Cathay Financial i.e., Cathay Financial and Ligitek Electronics go up and down completely randomly.
Pair Corralation between Cathay Financial and Ligitek Electronics
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Ligitek Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 26.27 times less risky than Ligitek Electronics. The stock trades about -0.35 of its potential returns per unit of risk. The Ligitek Electronics Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,350 in Ligitek Electronics Co on February 1, 2024 and sell it today you would earn a total of 45.00 from holding Ligitek Electronics Co or generate 1.91% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Cathay Financial Holding vs. Ligitek Electronics Co
Performance |
Timeline |
Cathay Financial Holding |
Ligitek Electronics |
Cathay Financial and Ligitek Electronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cathay Financial and Ligitek Electronics
The main advantage of trading using opposite Cathay Financial and Ligitek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Ligitek Electronics 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 Ligitek Electronics will offset losses from the drop in Ligitek Electronics' long position.Cathay Financial vs. China Metal Products | Cathay Financial vs. Tai Tung Communication | Cathay Financial vs. Arima Communications Corp | Cathay Financial vs. Cayenne Entertainment Technology |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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