Correlation Between Cathay Financial and PharmaEngine
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and PharmaEngine 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 Financial and PharmaEngine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Financial Holding and PharmaEngine, you can compare the effects of market volatilities on Cathay Financial and PharmaEngine 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 Financial with a short position of PharmaEngine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and PharmaEngine.
Diversification Opportunities for Cathay Financial and PharmaEngine
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and PharmaEngine is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and PharmaEngine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PharmaEngine and Cathay Financial 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 Financial Holding are associated (or correlated) with PharmaEngine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PharmaEngine has no effect on the direction of Cathay Financial i.e., Cathay Financial and PharmaEngine go up and down completely randomly.
Pair Corralation between Cathay Financial and PharmaEngine
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the PharmaEngine. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 17.98 times less risky than PharmaEngine. The stock trades about -0.09 of its potential returns per unit of risk. The PharmaEngine is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 8,880 in PharmaEngine on October 19, 2024 and sell it today you would earn a total of 630.00 from holding PharmaEngine or generate 7.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cathay Financial Holding vs. PharmaEngine
Performance |
| Timeline |
| Cathay Financial Holding |
| PharmaEngine |
Cathay Financial and PharmaEngine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and PharmaEngine
The main advantage of trading using opposite Cathay Financial and PharmaEngine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, PharmaEngine 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 PharmaEngine will offset losses from the drop in PharmaEngine's long position.| Cathay Financial vs. Compal Broadband Networks | Cathay Financial vs. China Mobile | Cathay Financial vs. Chinese Maritime Transport | Cathay Financial vs. Camellia Metal Co |
| PharmaEngine vs. Oneness Biotech Co | PharmaEngine vs. EirGenix | PharmaEngine vs. Medigen Vaccine Biologics | PharmaEngine vs. OBI Pharma |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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