Correlation Between China Development and Cathay Real
Can any of the company-specific risk be diversified away by investing in both China Development and Cathay Real 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 China Development and Cathay Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Cathay Real Estate, you can compare the effects of market volatilities on China Development and Cathay Real 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 China Development with a short position of Cathay Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Cathay Real.
Diversification Opportunities for China Development and Cathay Real
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Cathay is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate and China Development 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 China Development Financial are associated (or correlated) with Cathay Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of China Development i.e., China Development and Cathay Real go up and down completely randomly.
Pair Corralation between China Development and Cathay Real
Assuming the 90 days trading horizon China Development is expected to generate 1.53 times less return on investment than Cathay Real. But when comparing it to its historical volatility, China Development Financial is 2.02 times less risky than Cathay Real. It trades about 0.14 of its potential returns per unit of risk. Cathay Real Estate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,415 in Cathay Real Estate on August 30, 2024 and sell it today you would earn a total of 115.00 from holding Cathay Real Estate or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Cathay Real Estate
Performance |
| Timeline |
| China Development |
| Cathay Real Estate |
China Development and Cathay Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Cathay Real
The main advantage of trading using opposite China Development and Cathay Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Cathay Real 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 Cathay Real will offset losses from the drop in Cathay Real's long position.| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
| Cathay Real vs. Tainan Spinning Co | Cathay Real vs. Carnival Industrial Corp | Cathay Real vs. Symtek Automation Asia | Cathay Real vs. CTCI 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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