Correlation Between Cathay Financial and Cayman Engley

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

Diversification Opportunities for Cathay Financial and Cayman Engley

-0.77

Correlation Coefficient

Cathay Financial  Cayman Engley

Pay attention - limited upside

The 3 months correlation between Cathay and Cayman is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Cayman Engley Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cayman Engley Industrial 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 Cayman Engley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cayman Engley Industrial has no effect on the direction of Cathay Financial i.e., Cathay Financial and Cayman Engley go up and down completely randomly.

Pair Corralation between Cathay Financial and Cayman Engley

Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.14 times more return on investment than Cayman Engley. However, Cathay Financial Holding is 7.19 times less risky than Cayman Engley. It trades about 0.12 of its potential returns per unit of risk. Cayman Engley Industrial is currently generating about -0.33 per unit of risk. If you would invest  5,920  in Cathay Financial Holding on October 20, 2024 and sell it today you would earn a total of  90.00  from holding Cathay Financial Holding or generate 1.52% return on investment over 90 days.

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

Cathay Financial Holding  vs.  Cayman Engley Industrial

Cathay Financial Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 9 (%) 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.

Cayman Engley Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cayman Engley Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Cathay Financial and Cayman Engley

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

The idea behind Cathay Financial Holding and Cayman Engley Industrial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.