Correlation Between Cathay Chemical and Launch Technologies
Can any of the company-specific risk be diversified away by investing in both Cathay Chemical and Launch Technologies 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 Launch Technologies 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 Launch Technologies Co, you can compare the effects of market volatilities on Cathay Chemical and Launch Technologies 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 Launch Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Chemical and Launch Technologies.
Diversification Opportunities for Cathay Chemical and Launch Technologies
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Launch is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Chemical Works and Launch Technologies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch Technologies 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 Launch Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch Technologies has no effect on the direction of Cathay Chemical i.e., Cathay Chemical and Launch Technologies go up and down completely randomly.
Pair Corralation between Cathay Chemical and Launch Technologies
Assuming the 90 days trading horizon Cathay Chemical Works is expected to under-perform the Launch Technologies. In addition to that, Cathay Chemical is 2.29 times more volatile than Launch Technologies Co. It trades about -0.21 of its total potential returns per unit of risk. Launch Technologies Co is currently generating about -0.26 per unit of volatility. If you would invest 4,170 in Launch Technologies Co on August 30, 2024 and sell it today you would lose (110.00) from holding Launch Technologies Co or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Chemical Works vs. Launch Technologies Co
Performance |
| Timeline |
| Cathay Chemical Works |
| Launch Technologies |
Cathay Chemical and Launch Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Chemical and Launch Technologies
The main advantage of trading using opposite Cathay Chemical and Launch Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Chemical position performs unexpectedly, Launch Technologies 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 Launch Technologies will offset losses from the drop in Launch Technologies' 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 |
| Launch Technologies vs. Univacco Technology | Launch Technologies vs. Integrated Service Technology | Launch Technologies vs. Microtips Technology | Launch Technologies vs. Arbor Technology |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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