Correlation Between Cathay Consolidated and Far Eastern

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

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

Diversification Opportunities for Cathay Consolidated and Far Eastern

-0.63

Correlation Coefficient

Cathay Consolidated  Far Eastern

Excellent diversification

The 3 months correlation between Cathay and Far is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Consolidated and Far Eastern New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far Eastern New and Cathay Consolidated 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 Consolidated are associated (or correlated) with Far Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far Eastern New has no effect on the direction of Cathay Consolidated i.e., Cathay Consolidated and Far Eastern go up and down completely randomly.

Pair Corralation between Cathay Consolidated and Far Eastern

Assuming the 90 days trading horizon Cathay Consolidated is expected to under-perform the Far Eastern. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Consolidated is 1.01 times less risky than Far Eastern. The stock trades about -0.12 of its potential returns per unit of risk. The Far Eastern New is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  3,305  in Far Eastern New on October 9, 2024 and sell it today you would lose (95.00) from holding Far Eastern New or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Cathay Consolidated  vs.  Far Eastern New

Cathay Consolidated

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Consolidated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cathay Consolidated is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Far Eastern New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Far Eastern New has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cathay Consolidated and Far Eastern

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

The idea behind Cathay Consolidated and Far Eastern New 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.