Correlation Between Cathay Financial and Info Tek

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

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

Diversification Opportunities for Cathay Financial and Info Tek

-0.58

Correlation Coefficient

Cathay Financial  Info Tek

Excellent diversification

The 3 months correlation between Cathay and Info is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Info Tek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Info Tek and Cathay Financial 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 Financial Holding are associated (or correlated) with Info Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Info Tek has no effect on the direction of Cathay Financial i.e., Cathay Financial and Info Tek go up and down completely randomly.

Pair Corralation between Cathay Financial and Info Tek

Assuming the 90 days trading horizon Cathay Financial Holding is expected to generate 0.06 times more return on investment than Info Tek. However, Cathay Financial Holding is 17.45 times less risky than Info Tek. It trades about 0.26 of its potential returns per unit of risk. Info Tek is currently generating about -0.33 per unit of risk. If you would invest  6,030  in Cathay Financial Holding on February 2, 2024 and sell it today you would earn a total of  30.00  from holding Cathay Financial Holding or generate 0.5% return on investment over 90 days.

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

Cathay Financial Holding  vs.  Info Tek

Cathay Financial Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Financial Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cathay Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Info Tek

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Info Tek has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Cathay Financial and Info Tek

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

The idea behind Cathay Financial Holding and Info Tek 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 Valuation module to check real value of public entities based on technical and fundamental data.