Correlation Between Iron Force and Cathay Financial

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

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

Diversification Opportunities for Iron Force and Cathay Financial

0.37

Correlation Coefficient

Iron Force  Cathay Financial

Weak diversification

The 3 months correlation between Iron and Cathay is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Iron Force Industrial 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 Iron Force 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 Iron Force Industrial 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 Iron Force i.e., Iron Force and Cathay Financial go up and down completely randomly.

Pair Corralation between Iron Force and Cathay Financial

Assuming the 90 days trading horizon Iron Force Industrial is expected to under-perform the Cathay Financial. In addition to that, Iron Force is 7.27 times more volatile than Cathay Financial Holding. It trades about -0.05 of its total potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.18 per unit of volatility. If you would invest  6,090  in Cathay Financial Holding on December 23, 2024 and sell it today you would earn a total of  100.00  from holding Cathay Financial Holding or generate 1.64% return on investment over 90 days.

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

Iron Force Industrial  vs.  Cathay Financial Holding

Iron Force Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iron Force Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Iron Force is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cathay Financial Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 13 (%) 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 Iron Force and Cathay Financial

The main advantage of trading using opposite Iron Force and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Force 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 Iron Force Industrial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.