Correlation Between Columbia Financial and Cathay General
Can any of the company-specific risk be diversified away by investing in both Columbia Financial and Cathay General 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 Columbia Financial and Cathay General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Financial and Cathay General Bancorp, you can compare the effects of market volatilities on Columbia Financial and Cathay General 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 Columbia Financial with a short position of Cathay General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Financial and Cathay General.
Diversification Opportunities for Columbia Financial and Cathay General
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Columbia and Cathay is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Financial and Cathay General Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay General Bancorp and Columbia Financial 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 Columbia Financial are associated (or correlated) with Cathay General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay General Bancorp has no effect on the direction of Columbia Financial i.e., Columbia Financial and Cathay General go up and down completely randomly.
Pair Corralation between Columbia Financial and Cathay General
Given the investment horizon of 90 days Columbia Financial is expected to generate 1.77 times less return on investment than Cathay General. But when comparing it to its historical volatility, Columbia Financial is 1.18 times less risky than Cathay General. It trades about 0.15 of its potential returns per unit of risk. Cathay General Bancorp is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,646 in Cathay General Bancorp on August 28, 2024 and sell it today you would earn a total of 739.00 from holding Cathay General Bancorp or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Financial vs. Cathay General Bancorp
Performance |
| Timeline |
| Columbia Financial |
| Cathay General Bancorp |
Columbia Financial and Cathay General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Financial and Cathay General
The main advantage of trading using opposite Columbia Financial and Cathay General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Financial position performs unexpectedly, Cathay General 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 General will offset losses from the drop in Cathay General's long position.| Columbia Financial vs. Fifth Third Bancorp | Columbia Financial vs. Zions Bancorporation | Columbia Financial vs. Huntington Bancshares Incorporated | Columbia Financial vs. Comerica |
| Cathay General vs. Fifth Third Bancorp | Cathay General vs. Zions Bancorporation | Cathay General vs. Huntington Bancshares Incorporated | Cathay General vs. Comerica |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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