Correlation Between Cathay Chemical and FDC International
Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and FDC International 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 FDC International 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 FDC International Hotels, you can compare the effects of market volatilities on Cathay Chemical and FDC International 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 FDC International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and FDC International.
Diversification Opportunities for Cathay Chemical and FDC International
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and FDC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and FDC International Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDC International Hotels 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 FDC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDC International Hotels has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and FDC International go up and down completely randomly.
Pair Corralation between Cathay Chemical and FDC International
Assuming the 90 days trading horizon Cathay Chemical Works is expected to generate 0.45 times more return on investment than FDC International. However, Cathay Chemical Works is 2.21 times less risky than FDC International. It trades about 0.23 of its potential returns per unit of risk. FDC International Hotels is currently generating about 0.07 per unit of risk. If you would invest 4,610 in Cathay Chemical Works on October 23, 2024 and sell it today you would earn a total of 275.00 from holding Cathay Chemical Works or generate 5.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Chemical Works vs. FDC International Hotels
Performance |
| Timeline |
| Cathay Chemical Works |
| FDC International Hotels |
Cathay Chemical and FDC International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Chemical and FDC International
The main advantage of trading using opposite Cathay Chemical and FDC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, FDC International 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 FDC International will offset losses from the drop in FDC International's long position.| Cathay Chemical vs. Cathay Real Estate | Cathay Chemical vs. Huaku Development Co | Cathay Chemical vs. BES Engineering Co | Cathay Chemical vs. Prince Housing Development |
| FDC International vs. Formosa International Hotels | FDC International vs. My Humble House | FDC International vs. Wanhwa Enterprise Co | FDC International vs. Gourmet Master Co |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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