Correlation Between Cathay Financial and Center Laboratories
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Center Laboratories 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 Center Laboratories 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 Center Laboratories, you can compare the effects of market volatilities on Cathay Financial and Center Laboratories 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 Center Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Center Laboratories.
Diversification Opportunities for Cathay Financial and Center Laboratories
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Center is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Center Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Center Laboratories 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 Center Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Center Laboratories has no effect on the direction of Cathay Financial i.e., Cathay Financial and Center Laboratories go up and down completely randomly.
Pair Corralation between Cathay Financial and Center Laboratories
Assuming the 90 days trading horizon Cathay Financial is expected to generate 2.13 times less return on investment than Center Laboratories. But when comparing it to its historical volatility, Cathay Financial Holding is 7.81 times less risky than Center Laboratories. It trades about 0.31 of its potential returns per unit of risk. Center Laboratories is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,085 in Center Laboratories on November 28, 2024 and sell it today you would earn a total of 55.00 from holding Center Laboratories or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Center Laboratories
Performance |
| Timeline |
| Cathay Financial Holding |
| Center Laboratories |
Cathay Financial and Center Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Center Laboratories
The main advantage of trading using opposite Cathay Financial and Center Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Center Laboratories 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 Center Laboratories will offset losses from the drop in Center Laboratories' long position.| Cathay Financial vs. Mechema Chemicals Int | Cathay Financial vs. Jinan Acetate Chemical | Cathay Financial vs. Double Bond Chemical | Cathay Financial vs. Standard Chemical Pharmaceutical |
| Center Laboratories vs. TTY Biopharm Co | Center Laboratories vs. TCI Co | Center Laboratories vs. Synmosa Biopharma | Center Laboratories vs. Adimmune 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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