Correlation Between Cathay General and Capitol Federal
Can any of the company-specific risk be diversified away by investing in both Cathay General and Capitol Federal 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 General and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay General Bancorp and Capitol Federal Financial, you can compare the effects of market volatilities on Cathay General and Capitol Federal 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 General with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay General and Capitol Federal.
Diversification Opportunities for Cathay General and Capitol Federal
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cathay and Capitol is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Cathay General Bancorp and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and Cathay General 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 General Bancorp are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of Cathay General i.e., Cathay General and Capitol Federal go up and down completely randomly.
Pair Corralation between Cathay General and Capitol Federal
Given the investment horizon of 90 days Cathay General Bancorp is expected to generate 0.91 times more return on investment than Capitol Federal. However, Cathay General Bancorp is 1.1 times less risky than Capitol Federal. It trades about 0.07 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.03 per unit of risk. If you would invest 3,234 in Cathay General Bancorp on August 24, 2024 and sell it today you would earn a total of 2,047 from holding Cathay General Bancorp or generate 63.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay General Bancorp vs. Capitol Federal Financial
Performance |
| Timeline |
| Cathay General Bancorp |
| Capitol Federal Financial |
Cathay General and Capitol Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay General and Capitol Federal
The main advantage of trading using opposite Cathay General and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay General position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.| Cathay General vs. Glacier Bancorp | Cathay General vs. Capitol Federal Financial | Cathay General vs. Byline Bancorp | Cathay General vs. First Financial Bankshares |
| Capitol Federal vs. Independent Bank | Capitol Federal vs. BankFinancial | Capitol Federal vs. Business First Bancshares | Capitol Federal vs. First Bancorp |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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