Correlation Between Est Global and Cathay Financial

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

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

Diversification Opportunities for Est Global and Cathay Financial

-0.04

Correlation Coefficient

Est Global  Cathay Financial

Good diversification

The 3 months correlation between Est and Cathay is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Est Global Apparel 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 Est Global 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 Est Global Apparel 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 Est Global i.e., Est Global and Cathay Financial go up and down completely randomly.

Pair Corralation between Est Global and Cathay Financial

Assuming the 90 days trading horizon Est Global Apparel is expected to generate 7.7 times more return on investment than Cathay Financial. However, Est Global is 7.7 times more volatile than Cathay Financial Holding. It trades about 0.03 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.02 per unit of risk. If you would invest  1,421  in Est Global Apparel on September 19, 2024 and sell it today you would earn a total of  324.00  from holding Est Global Apparel or generate 22.8% return on investment over 90 days.

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

Est Global Apparel  vs.  Cathay Financial Holding

Est Global Apparel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Est Global Apparel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Est Global is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Est Global and Cathay Financial

The main advantage of trading using opposite Est Global and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Est Global 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 Est Global Apparel 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.