Correlation Between Grand Ocean and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Grand Ocean and Cathay Financial 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 Grand Ocean and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grand Ocean Retail and Cathay Financial Holding, you can compare the effects of market volatilities on Grand Ocean and Cathay Financial 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 Grand Ocean with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Ocean and Cathay Financial.
Diversification Opportunities for Grand Ocean and Cathay Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grand and Cathay is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Grand Ocean Retail and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding and Grand Ocean 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 Grand Ocean Retail are associated (or correlated) with Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of Grand Ocean i.e., Grand Ocean and Cathay Financial go up and down completely randomly.
Pair Corralation between Grand Ocean and Cathay Financial
Assuming the 90 days trading horizon Grand Ocean Retail is expected to generate 17.41 times more return on investment than Cathay Financial. However, Grand Ocean is 17.41 times more volatile than Cathay Financial Holding. It trades about 0.07 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.27 per unit of risk. If you would invest 1,170 in Grand Ocean Retail on September 2, 2024 and sell it today you would earn a total of 55.00 from holding Grand Ocean Retail or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grand Ocean Retail vs. Cathay Financial Holding
Performance |
| Timeline |
| Grand Ocean Retail |
| Cathay Financial Holding |
Grand Ocean and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grand Ocean and Cathay Financial
The main advantage of trading using opposite Grand Ocean and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Ocean position performs unexpectedly, Cathay Financial 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 Financial will offset losses from the drop in Cathay Financial's long position.| Grand Ocean vs. First Steamship Co | Grand Ocean vs. Far Eastern Department | Grand Ocean vs. LongDa Construction Development | Grand Ocean vs. Collins Co |
| Cathay Financial vs. Cathay Financial Holding | Cathay Financial vs. Fubon Financial Holding | Cathay Financial vs. Mercuries Life Insurance |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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