Correlation Between Cathay Financial and MJ International

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

Diversification Opportunities for Cathay Financial and MJ International

-0.75

Correlation Coefficient

Cathay Financial  MJ International

Pay attention - limited upside

The 3 months correlation between Cathay and 8466 is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and MJ International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MJ International 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 MJ International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MJ International has no effect on the direction of Cathay Financial i.e., Cathay Financial and MJ International go up and down completely randomly.

Pair Corralation between Cathay Financial and MJ International

Assuming the 90 days trading horizon Cathay Financial is expected to generate 4.22 times less return on investment than MJ International. But when comparing it to its historical volatility, Cathay Financial Holding is 6.03 times less risky than MJ International. It trades about 0.03 of its potential returns per unit of risk. MJ International Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,868  in MJ International Co on October 24, 2024 and sell it today you would earn a total of  532.00  from holding MJ International Co or generate 13.75% 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.  MJ International Co

Cathay Financial Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 10 (%) 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.

MJ International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MJ International Co 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 MJ International

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

The idea behind Cathay Financial Holding and MJ International 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.