Correlation Between Cathay Financial and Dimension Computer

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

Diversification Opportunities for Cathay Financial and Dimension Computer

-0.35

Correlation Coefficient

Cathay Financial  Dimension Computer

Very good diversification

The 3 months correlation between Cathay and Dimension is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Dimension Computer Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimension Computer 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 Dimension Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimension Computer has no effect on the direction of Cathay Financial i.e., Cathay Financial and Dimension Computer go up and down completely randomly.

Pair Corralation between Cathay Financial and Dimension Computer

Assuming the 90 days trading horizon Cathay Financial is expected to generate 7.66 times less return on investment than Dimension Computer. But when comparing it to its historical volatility, Cathay Financial Holding is 20.76 times less risky than Dimension Computer. It trades about 0.5 of its potential returns per unit of risk. Dimension Computer Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,275  in Dimension Computer Technology on September 15, 2024 and sell it today you would earn a total of  340.00  from holding Dimension Computer Technology or generate 14.95% 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.  Dimension Computer Technology

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.

Dimension Computer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimension Computer Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dimension Computer 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 Dimension Computer

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

The idea behind Cathay Financial Holding and Dimension Computer Technology 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.