Correlation Between Chong Hong and Cathay Real

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

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

Diversification Opportunities for Chong Hong and Cathay Real

0.56

Correlation Coefficient

Chong Hong  Cathay Real

Very weak diversification

The 3 months correlation between Chong and Cathay is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Cathay Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of Chong Hong i.e., Chong Hong and Cathay Real go up and down completely randomly.

Pair Corralation between Chong Hong and Cathay Real

Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Cathay Real. In addition to that, Chong Hong is 1.22 times more volatile than Cathay Real Estate. It trades about -0.13 of its total potential returns per unit of risk. Cathay Real Estate is currently generating about -0.05 per unit of volatility. If you would invest  2,620  in Cathay Real Estate on September 15, 2024 and sell it today you would lose (185.00) from holding Cathay Real Estate or give up 7.06% of portfolio value over 90 days.

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

Chong Hong Construction  vs.  Cathay Real Estate

Chong Hong Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chong Hong Construction 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Cathay Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cathay Real 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 Chong Hong and Cathay Real

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

The idea behind Chong Hong Construction and Cathay Real Estate 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.