Correlation Between Cathay Financial and Great Tree
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Great Tree 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 Great Tree 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 Great Tree Pharmacy, you can compare the effects of market volatilities on Cathay Financial and Great Tree 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 Great Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Great Tree.
Diversification Opportunities for Cathay Financial and Great Tree
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cathay and Great is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Great Tree Pharmacy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Tree Pharmacy 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 Great Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Tree Pharmacy has no effect on the direction of Cathay Financial i.e., Cathay Financial and Great Tree go up and down completely randomly.
Pair Corralation between Cathay Financial and Great Tree
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.14 times more return on investment than Great Tree. However, Cathay Financial Holding is 7.28 times less risky than Great Tree. It trades about 0.02 of its potential returns per unit of risk. Great Tree Pharmacy is currently generating about -0.05 per unit of risk. If you would invest 6,000 in Cathay Financial Holding on January 18, 2025 and sell it today you would earn a total of 160.00 from holding Cathay Financial Holding or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Financial Holding vs. Great Tree Pharmacy
Performance |
| Timeline |
| Cathay Financial Holding |
| Great Tree Pharmacy |
Cathay Financial and Great Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Great Tree
The main advantage of trading using opposite Cathay Financial and Great Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Great Tree 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 Great Tree will offset losses from the drop in Great Tree's long position.| Cathay Financial vs. Dadi Early Childhood Education | Cathay Financial vs. Chunghwa Telecom Co | Cathay Financial vs. Tai Tung Communication | Cathay Financial vs. WinMate Communication INC |
| Great Tree vs. Yulon Finance Corp | Great Tree vs. Chailease Holding Co | Great Tree vs. momo Inc | Great Tree vs. Poya International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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