Correlation Between Cathay Real and Radium Life
Can any of the company-specific risk be diversified away by investing in both Cathay Real and Radium Life 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 Radium Life 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 Radium Life Tech, you can compare the effects of market volatilities on Cathay Real and Radium Life 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 Radium Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Real and Radium Life.
Diversification Opportunities for Cathay Real and Radium Life
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cathay and Radium is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Real Estate and Radium Life Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radium Life Tech 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 Radium Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radium Life Tech has no effect on the direction of Cathay Real i.e., Cathay Real and Radium Life go up and down completely randomly.
Pair Corralation between Cathay Real and Radium Life
Assuming the 90 days trading horizon Cathay Real Estate is expected to generate 1.48 times more return on investment than Radium Life. However, Cathay Real is 1.48 times more volatile than Radium Life Tech. It trades about 0.06 of its potential returns per unit of risk. Radium Life Tech is currently generating about 0.02 per unit of risk. If you would invest 1,530 in Cathay Real Estate on August 27, 2024 and sell it today you would earn a total of 1,030 from holding Cathay Real Estate or generate 67.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Real Estate vs. Radium Life Tech
Performance |
| Timeline |
| Cathay Real Estate |
| Radium Life Tech |
Cathay Real and Radium Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Real and Radium Life
The main advantage of trading using opposite Cathay Real and Radium Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Real position performs unexpectedly, Radium Life 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 Radium Life will offset losses from the drop in Radium Life's long position.| Cathay Real vs. Chainqui Construction Development | Cathay Real vs. Zinwell | Cathay Real vs. Symtek Automation Asia | Cathay Real vs. CTCI Corp |
| Radium Life vs. Chainqui Construction Development | Radium Life vs. Zinwell | Radium Life vs. Symtek Automation Asia | Radium Life vs. CTCI Corp |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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