Correlation Between Cathay Biotech and Xizi Clean

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

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

Diversification Opportunities for Cathay Biotech and Xizi Clean

0.74

Correlation Coefficient

Cathay Biotech  Xizi Clean

Poor diversification

The 3 months correlation between Cathay and Xizi is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Biotech and Xizi Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xizi Clean Energy and Cathay Biotech 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 Biotech are associated (or correlated) with Xizi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xizi Clean Energy has no effect on the direction of Cathay Biotech i.e., Cathay Biotech and Xizi Clean go up and down completely randomly.

Pair Corralation between Cathay Biotech and Xizi Clean

Assuming the 90 days trading horizon Cathay Biotech is expected to under-perform the Xizi Clean. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Biotech is 1.08 times less risky than Xizi Clean. The stock trades about -0.03 of its potential returns per unit of risk. The Xizi Clean Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,531  in Xizi Clean Energy on October 4, 2024 and sell it today you would lose (420.00) from holding Xizi Clean Energy or give up 27.43% of portfolio value over 90 days.

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

Cathay Biotech  vs.  Xizi Clean Energy

Cathay Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xizi Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xizi Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cathay Biotech and Xizi Clean

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

The idea behind Cathay Biotech and Xizi Clean Energy 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.