Correlation Between Cathay Real and New Asia
Can any of the company-specific risk be diversified away by investing in both Cathay Real and New Asia 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 Real and New Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Real Estate and New Asia Construction, you can compare the effects of market volatilities on Cathay Real and New Asia 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 Real with a short position of New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Real and New Asia.
Diversification Opportunities for Cathay Real and New Asia
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and New is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Real Estate and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction and Cathay Real 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 Real Estate are associated (or correlated) with New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Cathay Real i.e., Cathay Real and New Asia go up and down completely randomly.
Pair Corralation between Cathay Real and New Asia
Assuming the 90 days trading horizon Cathay Real Estate is expected to under-perform the New Asia. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Real Estate is 2.5 times less risky than New Asia. The stock trades about -0.17 of its potential returns per unit of risk. The New Asia Construction is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,345 in New Asia Construction on October 23, 2024 and sell it today you would earn a total of 435.00 from holding New Asia Construction or generate 32.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Real Estate vs. New Asia Construction
Performance |
| Timeline |
| Cathay Real Estate |
| New Asia Construction |
Cathay Real and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Real and New Asia
The main advantage of trading using opposite Cathay Real and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Real position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| Cathay Real vs. Cathay Financial Holding | Cathay Real vs. Nan Ya Plastics | Cathay Real vs. Chang Hwa Commercial | Cathay Real vs. China Development Financial |
| New Asia vs. BES Engineering Co | New Asia vs. Delpha Construction Co | New Asia vs. Cathay Real Estate | New Asia vs. Da Cin Construction 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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