Correlation Between Cathay Financial and Victory New

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

Diversification Opportunities for Cathay Financial and Victory New

-0.33

Correlation Coefficient

Cathay Financial  Victory New

Very good diversification

The 3 months correlation between Cathay and Victory is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Victory New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory New Materials 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 Victory New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory New Materials has no effect on the direction of Cathay Financial i.e., Cathay Financial and Victory New go up and down completely randomly.

Pair Corralation between Cathay Financial and Victory New

Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.4 times more return on investment than Victory New. However, Cathay Financial Holding is 2.48 times less risky than Victory New. It trades about 0.5 of its potential returns per unit of risk. Victory New Materials is currently generating about -0.32 per unit of risk. If you would invest  5,890  in Cathay Financial Holding on September 15, 2024 and sell it today you would earn a total of  120.00  from holding Cathay Financial Holding or generate 2.04% return on investment over 90 days.

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

Cathay Financial Holding  vs.  Victory New Materials

Cathay Financial Holding

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 28 (%) 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.

Victory New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Victory New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Victory New 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 Victory New

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

The idea behind Cathay Financial Holding and Victory New Materials 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.