Correlation Between Cathay Financial and Sporton International
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Sporton International 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 Sporton International 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 Sporton International, you can compare the effects of market volatilities on Cathay Financial and Sporton International 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 Sporton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Sporton International.
Diversification Opportunities for Cathay Financial and Sporton International
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cathay and Sporton is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Cathay Financial i.e., Cathay Financial and Sporton International go up and down completely randomly.
Pair Corralation between Cathay Financial and Sporton International
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.17 times more return on investment than Sporton International. However, Cathay Financial Holding is 5.86 times less risky than Sporton International. It trades about 0.2 of its potential returns per unit of risk. Sporton International is currently generating about -0.18 per unit of risk. If you would invest 5,930 in Cathay Financial Holding on August 30, 2024 and sell it today you would earn a total of 60.00 from holding Cathay Financial Holding or generate 1.01% 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. Sporton International
Performance |
| Timeline |
| Cathay Financial Holding |
| Sporton International |
Cathay Financial and Sporton International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Sporton International
The main advantage of trading using opposite Cathay Financial and Sporton International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Sporton International 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 Sporton International will offset losses from the drop in Sporton International's long position.| Cathay Financial vs. Daxin Materials Corp | Cathay Financial vs. Solar Applied Materials | Cathay Financial vs. Shinkong Insurance Co | Cathay Financial vs. Mega Financial Holding |
| Sporton International vs. Cameo Communications | Sporton International vs. Camellia Metal Co | Sporton International vs. Wha Yu Industrial | Sporton International vs. Wah Hong Industrial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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