Correlation Between Cathay Dow and Cathay DJIA

Can any of the company-specific risk be diversified away by investing in both Cathay Dow and Cathay DJIA 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 Dow and Cathay DJIA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cathay Dow Jones and Cathay DJIA Inv, you can compare the effects of market volatilities on Cathay Dow and Cathay DJIA 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 Dow with a short position of Cathay DJIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Dow and Cathay DJIA.

Diversification Opportunities for Cathay Dow and Cathay DJIA

-0.96

Correlation Coefficient

Cathay Dow  Cathay DJIA

Pay attention - limited upside

The 3 months correlation between Cathay and Cathay is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Dow Jones and Cathay DJIA Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay DJIA Inv and Cathay Dow 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 Dow Jones are associated (or correlated) with Cathay DJIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay DJIA Inv has no effect on the direction of Cathay Dow i.e., Cathay Dow and Cathay DJIA go up and down completely randomly.

Pair Corralation between Cathay Dow and Cathay DJIA

Assuming the 90 days trading horizon Cathay Dow Jones is expected to under-perform the Cathay DJIA. But the etf apears to be less risky and, when comparing its historical volatility, Cathay Dow Jones is 1.03 times less risky than Cathay DJIA. The etf trades about 0.0 of its potential returns per unit of risk. The Cathay DJIA Inv is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  651.00  in Cathay DJIA Inv on October 20, 2024 and sell it today you would earn a total of  13.00  from holding Cathay DJIA Inv or generate 2.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cathay Dow Jones  vs.  Cathay DJIA Inv

Cathay Dow Jones

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Dow Jones has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cathay Dow is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Cathay DJIA Inv

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay DJIA Inv are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cathay DJIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cathay Dow and Cathay DJIA

The main advantage of trading using opposite Cathay Dow and Cathay DJIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Dow position performs unexpectedly, Cathay DJIA 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 DJIA will offset losses from the drop in Cathay DJIA's long position.

The idea behind Cathay Dow Jones and Cathay DJIA Inv 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.