Correlation Between Hiwin Technologies and Cathay Consolidated

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

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

Diversification Opportunities for Hiwin Technologies and Cathay Consolidated

0.61

Correlation Coefficient

Hiwin Technologies  Cathay Consolidated

Poor diversification

The 3 months correlation between Hiwin and Cathay is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hiwin Technologies Corp and Cathay Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Consolidated and Hiwin Technologies 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 Hiwin Technologies Corp are associated (or correlated) with Cathay Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Consolidated has no effect on the direction of Hiwin Technologies i.e., Hiwin Technologies and Cathay Consolidated go up and down completely randomly.

Pair Corralation between Hiwin Technologies and Cathay Consolidated

Assuming the 90 days trading horizon Hiwin Technologies Corp is expected to generate 1.44 times more return on investment than Cathay Consolidated. However, Hiwin Technologies is 1.44 times more volatile than Cathay Consolidated. It trades about 0.14 of its potential returns per unit of risk. Cathay Consolidated is currently generating about 0.13 per unit of risk. If you would invest  20,300  in Hiwin Technologies Corp on September 17, 2024 and sell it today you would earn a total of  4,500  from holding Hiwin Technologies Corp or generate 22.17% return on investment over 90 days.

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

Hiwin Technologies Corp  vs.  Cathay Consolidated

Hiwin Technologies Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hiwin Technologies Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hiwin Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Cathay Consolidated

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Consolidated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cathay Consolidated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hiwin Technologies and Cathay Consolidated

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

The idea behind Hiwin Technologies Corp and Cathay Consolidated 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.