Correlation Between First Copper and Cathay Financial

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

By analyzing existing cross correlation between First Copper Technology and Cathay Financial Holding, you can compare the effects of market volatilities on First Copper and Cathay 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 First Copper with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Copper and Cathay Financial.

Diversification Opportunities for First Copper and Cathay Financial

-0.55

Correlation Coefficient

First Copper  Cathay Financial

Excellent diversification

The 3 months correlation between First and Cathay is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Copper Technology and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding and First Copper 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 First Copper Technology are associated (or correlated) with Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of First Copper i.e., First Copper and Cathay Financial go up and down completely randomly.

Pair Corralation between First Copper and Cathay Financial

Assuming the 90 days trading horizon First Copper Technology is expected to generate 6.92 times more return on investment than Cathay Financial. However, First Copper is 6.92 times more volatile than Cathay Financial Holding. It trades about 0.04 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.02 per unit of risk. If you would invest  3,175  in First Copper Technology on September 20, 2024 and sell it today you would earn a total of  595.00  from holding First Copper Technology or generate 18.74% return on investment over 90 days.

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

First Copper Technology  vs.  Cathay Financial Holding

First Copper Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Copper Technology 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cathay Financial Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Copper and Cathay Financial

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

The idea behind First Copper Technology and Cathay Financial Holding 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.