Correlation Between Cathay Biotech and King Strong

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

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

Diversification Opportunities for Cathay Biotech and King Strong

0.31

Correlation Coefficient

Cathay Biotech  King Strong

Weak diversification

The 3 months correlation between Cathay and King is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Biotech and King Strong New Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Strong New 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 King Strong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Strong New has no effect on the direction of Cathay Biotech i.e., Cathay Biotech and King Strong go up and down completely randomly.

Pair Corralation between Cathay Biotech and King Strong

Assuming the 90 days trading horizon Cathay Biotech is expected to under-perform the King Strong. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Biotech is 1.25 times less risky than King Strong. The stock trades about -0.03 of its potential returns per unit of risk. The King Strong New Material is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,837  in King Strong New Material on October 4, 2024 and sell it today you would earn a total of  323.00  from holding King Strong New Material or generate 17.58% return on investment over 90 days.

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

Cathay Biotech  vs.  King Strong New Material

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.

King Strong New

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, King Strong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cathay Biotech and King Strong

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

The idea behind Cathay Biotech and King Strong New Material 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.