Correlation Between Cathay Financial and Excelsior Medical

Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Excelsior Medical 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 Excelsior Medical 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 Excelsior Medical Co, you can compare the effects of market volatilities on Cathay Financial and Excelsior Medical 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 Excelsior Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Excelsior Medical.

Diversification Opportunities for Cathay Financial and Excelsior Medical

0.11

Correlation Coefficient

Cathay Financial  Excelsior Medical

Average diversification

The 3 months correlation between Cathay and Excelsior is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Excelsior Medical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelsior Medical 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 Excelsior Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelsior Medical has no effect on the direction of Cathay Financial i.e., Cathay Financial and Excelsior Medical go up and down completely randomly.

Pair Corralation between Cathay Financial and Excelsior Medical

Assuming the 90 days trading horizon Cathay Financial is expected to generate 3.24 times less return on investment than Excelsior Medical. But when comparing it to its historical volatility, Cathay Financial Holding is 3.05 times less risky than Excelsior Medical. It trades about 0.04 of its potential returns per unit of risk. Excelsior Medical Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,140  in Excelsior Medical Co on October 20, 2024 and sell it today you would earn a total of  1,470  from holding Excelsior Medical Co or generate 20.59% return on investment over 90 days.

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

Cathay Financial Holding  vs.  Excelsior Medical 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.

Excelsior Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cathay Financial and Excelsior Medical

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

The idea behind Cathay Financial Holding and Excelsior Medical 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.