Correlation Between Cathay Financial and Grand Ocean
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Grand Ocean 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 Grand Ocean 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 Grand Ocean Retail, you can compare the effects of market volatilities on Cathay Financial and Grand Ocean 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 Grand Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Grand Ocean.
Diversification Opportunities for Cathay Financial and Grand Ocean
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and Grand is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Grand Ocean Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Ocean Retail 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 Grand Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Ocean Retail has no effect on the direction of Cathay Financial i.e., Cathay Financial and Grand Ocean go up and down completely randomly.
Pair Corralation between Cathay Financial and Grand Ocean
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.11 times more return on investment than Grand Ocean. However, Cathay Financial Holding is 8.72 times less risky than Grand Ocean. It trades about 0.01 of its potential returns per unit of risk. Grand Ocean Retail is currently generating about -0.03 per unit of risk. If you would invest 5,970 in Cathay Financial Holding on November 28, 2024 and sell it today you would earn a total of 100.00 from holding Cathay Financial Holding or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Grand Ocean Retail
Performance |
| Timeline |
| Cathay Financial Holding |
| Grand Ocean Retail |
Cathay Financial and Grand Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Grand Ocean
The main advantage of trading using opposite Cathay Financial and Grand Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Grand Ocean 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 Grand Ocean will offset losses from the drop in Grand Ocean's 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 |
| Grand Ocean vs. First Steamship Co | Grand Ocean vs. Far Eastern Department | Grand Ocean vs. LongDa Construction Development | Grand Ocean vs. Collins 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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