Correlation Between Cathay Financial and Amtran Technology

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

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

Diversification Opportunities for Cathay Financial and Amtran Technology

-0.15

Correlation Coefficient

Cathay Financial  Amtran Technology

Good diversification

The 3 months correlation between Cathay and Amtran is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Amtran Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtran Technology and Cathay Financial 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 Financial Holding are associated (or correlated) with Amtran Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtran Technology has no effect on the direction of Cathay Financial i.e., Cathay Financial and Amtran Technology go up and down completely randomly.

Pair Corralation between Cathay Financial and Amtran Technology

Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Amtran Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 10.19 times less risky than Amtran Technology. The stock trades about -0.1 of its potential returns per unit of risk. The Amtran Technology Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,930  in Amtran Technology Co on October 10, 2024 and sell it today you would lose (10.00) from holding Amtran Technology Co or give up 0.52% of portfolio value over 90 days.

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

Cathay Financial Holding  vs.  Amtran Technology Co

Cathay Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Amtran Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amtran Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Cathay Financial and Amtran Technology

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

The idea behind Cathay Financial Holding and Amtran Technology Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.