Correlation Between Cathay Consolidated and Baotek Industrial
Can any of the company-specific risk be diversified away by investing in both Cathay Consolidated and Baotek Industrial 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 Consolidated and Baotek Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Consolidated and Baotek Industrial Materials, you can compare the effects of market volatilities on Cathay Consolidated and Baotek Industrial 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 Consolidated with a short position of Baotek Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Consolidated and Baotek Industrial.
Diversification Opportunities for Cathay Consolidated and Baotek Industrial
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Baotek is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Consolidated and Baotek Industrial Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baotek Industrial and Cathay Consolidated 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 Consolidated are associated (or correlated) with Baotek Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baotek Industrial has no effect on the direction of Cathay Consolidated i.e., Cathay Consolidated and Baotek Industrial go up and down completely randomly.
Pair Corralation between Cathay Consolidated and Baotek Industrial
Assuming the 90 days trading horizon Cathay Consolidated is expected to generate 0.6 times more return on investment than Baotek Industrial. However, Cathay Consolidated is 1.67 times less risky than Baotek Industrial. It trades about 0.24 of its potential returns per unit of risk. Baotek Industrial Materials is currently generating about 0.07 per unit of risk. If you would invest 10,250 in Cathay Consolidated on November 8, 2024 and sell it today you would earn a total of 700.00 from holding Cathay Consolidated or generate 6.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Consolidated vs. Baotek Industrial Materials
Performance |
| Timeline |
| Cathay Consolidated |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Baotek Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cathay Consolidated and Baotek Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Consolidated and Baotek Industrial
The main advantage of trading using opposite Cathay Consolidated and Baotek Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Consolidated position performs unexpectedly, Baotek Industrial 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 Baotek Industrial will offset losses from the drop in Baotek Industrial's long position.The idea behind Cathay Consolidated and Baotek Industrial Materials 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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