Correlation Between Cathay General and Customers Bancorp
Can any of the company-specific risk be diversified away by investing in both Cathay General and Customers Bancorp 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 Customers Bancorp 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 Customers Bancorp, you can compare the effects of market volatilities on Cathay General and Customers Bancorp 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 Customers Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay General and Customers Bancorp.
Diversification Opportunities for Cathay General and Customers Bancorp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Customers is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cathay General Bancorp and Customers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Customers Bancorp 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 Customers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Customers Bancorp has no effect on the direction of Cathay General i.e., Cathay General and Customers Bancorp go up and down completely randomly.
Pair Corralation between Cathay General and Customers Bancorp
Given the investment horizon of 90 days Cathay General is expected to generate 1.64 times less return on investment than Customers Bancorp. But when comparing it to its historical volatility, Cathay General Bancorp is 1.5 times less risky than Customers Bancorp. It trades about 0.18 of its potential returns per unit of risk. Customers Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,560 in Customers Bancorp on August 24, 2024 and sell it today you would earn a total of 968.00 from holding Customers Bancorp or generate 21.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay General Bancorp vs. Customers Bancorp
Performance |
| Timeline |
| Cathay General Bancorp |
| Customers Bancorp |
Cathay General and Customers Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay General and Customers Bancorp
The main advantage of trading using opposite Cathay General and Customers Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay General position performs unexpectedly, Customers Bancorp 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 Customers Bancorp will offset losses from the drop in Customers Bancorp'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 |
| Customers Bancorp vs. Glacier Bancorp | Customers Bancorp vs. Capitol Federal Financial | Customers Bancorp vs. Byline Bancorp | Customers Bancorp vs. Cathay General 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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