Correlation Between Xintec and Cathay Financial

Can any of the company-specific risk be diversified away by investing in both Xintec and Cathay Financial 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 Xintec and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xintec and Cathay Financial Holding, you can compare the effects of market volatilities on Xintec and Cathay Financial 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 Xintec with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xintec and Cathay Financial.

Diversification Opportunities for Xintec and Cathay Financial

-0.24

Correlation Coefficient

Xintec  Cathay Financial

Very good diversification

The 3 months correlation between Xintec and Cathay is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Xintec and Cathay Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Financial Holding and Xintec 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 Xintec are associated (or correlated) with Cathay Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Financial Holding has no effect on the direction of Xintec i.e., Xintec and Cathay Financial go up and down completely randomly.

Pair Corralation between Xintec and Cathay Financial

Assuming the 90 days trading horizon Xintec is expected to generate 7.17 times more return on investment than Cathay Financial. However, Xintec is 7.17 times more volatile than Cathay Financial Holding. It trades about 0.07 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.04 per unit of risk. If you would invest  9,301  in Xintec on September 20, 2024 and sell it today you would earn a total of  11,299  from holding Xintec or generate 121.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Xintec  vs.  Cathay Financial Holding

Xintec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xintec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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.

Pair Trading with Xintec and Cathay Financial

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

The idea behind Xintec and Cathay Financial Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.