Correlation Between Cathay Financial and Handa Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Handa Pharmaceuticals 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 Handa Pharmaceuticals 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 Handa Pharmaceuticals, you can compare the effects of market volatilities on Cathay Financial and Handa Pharmaceuticals 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 Handa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Handa Pharmaceuticals.
Diversification Opportunities for Cathay Financial and Handa Pharmaceuticals
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cathay and Handa is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Handa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Handa Pharmaceuticals 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 Handa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Handa Pharmaceuticals has no effect on the direction of Cathay Financial i.e., Cathay Financial and Handa Pharmaceuticals go up and down completely randomly.
Pair Corralation between Cathay Financial and Handa Pharmaceuticals
Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.13 times more return on investment than Handa Pharmaceuticals. However, Cathay Financial Holding is 7.5 times less risky than Handa Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Handa Pharmaceuticals is currently generating about -0.16 per unit of risk. If you would invest 5,940 in Cathay Financial Holding on September 1, 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 | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Cathay Financial Holding vs. Handa Pharmaceuticals
Performance |
| Timeline |
| Cathay Financial Holding |
| Handa Pharmaceuticals |
Cathay Financial and Handa Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Financial and Handa Pharmaceuticals
The main advantage of trading using opposite Cathay Financial and Handa Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Handa Pharmaceuticals 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 Handa Pharmaceuticals will offset losses from the drop in Handa Pharmaceuticals' long position.| Cathay Financial vs. MedFirst Healthcare Services | Cathay Financial vs. Great China Metal | Cathay Financial vs. Chernan Metal Industrial | Cathay Financial vs. Simple Mart Retail |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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