Correlation Between Cathay Biotech and Youngy Health

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

By analyzing existing cross correlation between Cathay Biotech and Youngy Health Co, you can compare the effects of market volatilities on Cathay Biotech and Youngy Health 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 Youngy Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Biotech and Youngy Health.

Diversification Opportunities for Cathay Biotech and Youngy Health

0.62

Correlation Coefficient

Cathay Biotech  Youngy Health

Poor diversification

The 3 months correlation between Cathay and Youngy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Biotech and Youngy Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youngy Health 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 Youngy Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youngy Health has no effect on the direction of Cathay Biotech i.e., Cathay Biotech and Youngy Health go up and down completely randomly.

Pair Corralation between Cathay Biotech and Youngy Health

Assuming the 90 days trading horizon Cathay Biotech is expected to generate 0.63 times more return on investment than Youngy Health. However, Cathay Biotech is 1.6 times less risky than Youngy Health. It trades about -0.15 of its potential returns per unit of risk. Youngy Health Co is currently generating about -0.14 per unit of risk. If you would invest  4,126  in Cathay Biotech on October 22, 2024 and sell it today you would lose (196.00) from holding Cathay Biotech or give up 4.75% 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.  Youngy Health Co

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 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.

Youngy Health

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Youngy Health Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Youngy Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cathay Biotech and Youngy Health

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

The idea behind Cathay Biotech and Youngy Health 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.