Correlation Between Huaku Development and Cathay Real
Can any of the company-specific risk be diversified away by investing in both Huaku Development and Cathay Real 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 Huaku Development and Cathay Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huaku Development Co and Cathay Real Estate, you can compare the effects of market volatilities on Huaku Development and Cathay Real 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 Huaku Development with a short position of Cathay Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaku Development and Cathay Real.
Diversification Opportunities for Huaku Development and Cathay Real
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Huaku and Cathay is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Huaku Development Co and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate and Huaku Development 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 Huaku Development Co are associated (or correlated) with Cathay Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of Huaku Development i.e., Huaku Development and Cathay Real go up and down completely randomly.
Pair Corralation between Huaku Development and Cathay Real
Assuming the 90 days trading horizon Huaku Development Co is expected to under-perform the Cathay Real. In addition to that, Huaku Development is 2.09 times more volatile than Cathay Real Estate. It trades about -0.21 of its total potential returns per unit of risk. Cathay Real Estate is currently generating about -0.28 per unit of volatility. If you would invest 2,405 in Cathay Real Estate on November 2, 2024 and sell it today you would lose (90.00) from holding Cathay Real Estate or give up 3.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huaku Development Co vs. Cathay Real Estate
Performance |
| Timeline |
| Huaku Development |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cathay Real Estate |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Huaku Development and Cathay Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huaku Development and Cathay Real
The main advantage of trading using opposite Huaku Development and Cathay Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaku Development position performs unexpectedly, Cathay Real 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 Cathay Real will offset losses from the drop in Cathay Real's long position.The idea behind Huaku Development Co and Cathay Real Estate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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