Correlation Between Cathay General and Columbia Financial
Can any of the company-specific risk be diversified away by investing in both Cathay General and Columbia 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 Cathay General and Columbia Financial 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 Columbia Financial, you can compare the effects of market volatilities on Cathay General and Columbia 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 Cathay General with a short position of Columbia Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay General and Columbia Financial.
Diversification Opportunities for Cathay General and Columbia Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cathay and Columbia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cathay General Bancorp and Columbia Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia 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 Columbia Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Financial has no effect on the direction of Cathay General i.e., Cathay General and Columbia Financial go up and down completely randomly.
Pair Corralation between Cathay General and Columbia Financial
Given the investment horizon of 90 days Cathay General Bancorp is expected to generate 0.94 times more return on investment than Columbia Financial. However, Cathay General Bancorp is 1.06 times less risky than Columbia Financial. It trades about 0.07 of its potential returns per unit of risk. Columbia Financial is currently generating about 0.01 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay General Bancorp vs. Columbia Financial
Performance |
| Timeline |
| Cathay General Bancorp |
| Columbia Financial |
Cathay General and Columbia Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay General and Columbia Financial
The main advantage of trading using opposite Cathay General and Columbia Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay General position performs unexpectedly, Columbia 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 Columbia Financial will offset losses from the drop in Columbia Financial'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 |
| Columbia Financial vs. Banco Bradesco SA | Columbia Financial vs. Itau Unibanco Banco | Columbia Financial vs. Banco Santander Brasil | Columbia Financial vs. Western Alliance Bancorporation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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