Correlation Between Cathay Biotech and Zoy Home

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Can any of the company-specific risk be diversified away by investing in both Cathay Biotech and Zoy Home 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 Biotech and Zoy Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay Biotech and Zoy Home Furnishing, you can compare the effects of market volatilities on Cathay Biotech and Zoy Home 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 Biotech with a short position of Zoy Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Biotech and Zoy Home.

Diversification Opportunities for Cathay Biotech and Zoy Home

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cathay and Zoy is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Biotech and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing and Cathay Biotech 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 Biotech are associated (or correlated) with Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of Cathay Biotech i.e., Cathay Biotech and Zoy Home go up and down completely randomly.

Pair Corralation between Cathay Biotech and Zoy Home

Assuming the 90 days trading horizon Cathay Biotech is expected to under-perform the Zoy Home. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Biotech is 1.34 times less risky than Zoy Home. The stock trades about -0.02 of its potential returns per unit of risk. The Zoy Home Furnishing is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,309  in Zoy Home Furnishing on September 14, 2024 and sell it today you would lose (66.00) from holding Zoy Home Furnishing or give up 5.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cathay Biotech  vs.  Zoy Home Furnishing

 Performance 
       Timeline  
Cathay Biotech 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Biotech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cathay Biotech sustained solid returns over the last few months and may actually be approaching a breakup point.
Zoy Home Furnishing 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Cathay Biotech and Zoy Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cathay Biotech and Zoy Home

The main advantage of trading using opposite Cathay Biotech and Zoy Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Biotech position performs unexpectedly, Zoy Home 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 Zoy Home will offset losses from the drop in Zoy Home's long position.
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The idea behind Cathay Biotech and Zoy Home Furnishing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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