Correlation Between Federal National and Cathay Financial
Can any of the company-specific risk be diversified away by investing in both Federal National 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 Federal National and Cathay Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal National Mortgage and Cathay Financial Holding, you can compare the effects of market volatilities on Federal National 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 Federal National with a short position of Cathay Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal National and Cathay Financial.
Diversification Opportunities for Federal National and Cathay Financial
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Federal and Cathay is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Federal National Mortgage 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 Federal National 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 Federal National Mortgage 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 Federal National i.e., Federal National and Cathay Financial go up and down completely randomly.
Pair Corralation between Federal National and Cathay Financial
Assuming the 90 days horizon Federal National Mortgage is expected to generate 12.24 times more return on investment than Cathay Financial. However, Federal National is 12.24 times more volatile than Cathay Financial Holding. It trades about 0.1 of its potential returns per unit of risk. Cathay Financial Holding is currently generating about 0.14 per unit of risk. If you would invest 585,000 in Federal National Mortgage on January 26, 2024 and sell it today you would earn a total of 615,000 from holding Federal National Mortgage or generate 105.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 19.76% |
| Values | Daily Returns |
Federal National Mortgage vs. Cathay Financial Holding
Performance |
| Timeline |
| Federal National Mortgage |
| Cathay Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Federal National and Cathay Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal National and Cathay Financial
The main advantage of trading using opposite Federal National and Cathay Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal National 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.| Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan | Federal National vs. Federal Home Loan |
| Cathay Financial vs. Sanlam Ltd PK | Cathay Financial vs. Ping An Insurance | Cathay Financial vs. CNO Financial Group | Cathay Financial vs. Genworth Financial |
Check out your portfolio center.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing |