Correlation Between Cathay Chemical and Tex Ray
Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and Tex Ray 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 Chemical and Tex Ray into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Chemical Works and Tex Ray Industrial Co, you can compare the effects of market volatilities on Cathay Chemical and Tex Ray 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 Chemical with a short position of Tex Ray. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and Tex Ray.
Diversification Opportunities for Cathay Chemical and Tex Ray
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Tex is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and Tex Ray Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Ray Industrial and Cathay Chemical 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 Chemical Works are associated (or correlated) with Tex Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Ray Industrial has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and Tex Ray go up and down completely randomly.
Pair Corralation between Cathay Chemical and Tex Ray
Assuming the 90 days trading horizon Cathay Chemical Works is expected to under-perform the Tex Ray. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Chemical Works is 1.32 times less risky than Tex Ray. The stock trades about -0.34 of its potential returns per unit of risk. The Tex Ray Industrial Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,045 in Tex Ray Industrial Co on August 30, 2024 and sell it today you would earn a total of 35.00 from holding Tex Ray Industrial Co or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Chemical Works vs. Tex Ray Industrial Co
Performance |
| Timeline |
| Cathay Chemical Works |
| Tex Ray Industrial |
Cathay Chemical and Tex Ray Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Chemical and Tex Ray
The main advantage of trading using opposite Cathay Chemical and Tex Ray positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, Tex Ray 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 Tex Ray will offset losses from the drop in Tex Ray's long position.| Cathay Chemical vs. Chung Hwa Chemical | Cathay Chemical vs. China Man Made Fiber | Cathay Chemical vs. Sesoda Corp | Cathay Chemical vs. Everlight Chemical Industrial |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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