Correlation Between Cathay Consolidated and Eclat Textile

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

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

Diversification Opportunities for Cathay Consolidated and Eclat Textile

-0.13

Correlation Coefficient

Cathay Consolidated  Eclat Textile

Good diversification

The 3 months correlation between Cathay and Eclat is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Consolidated and Eclat Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclat Textile and Cathay Consolidated 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 Consolidated are associated (or correlated) with Eclat Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclat Textile has no effect on the direction of Cathay Consolidated i.e., Cathay Consolidated and Eclat Textile go up and down completely randomly.

Pair Corralation between Cathay Consolidated and Eclat Textile

Assuming the 90 days trading horizon Cathay Consolidated is expected to generate 0.94 times more return on investment than Eclat Textile. However, Cathay Consolidated is 1.07 times less risky than Eclat Textile. It trades about 0.02 of its potential returns per unit of risk. Eclat Textile Co is currently generating about 0.0 per unit of risk. If you would invest  10,227  in Cathay Consolidated on September 15, 2024 and sell it today you would earn a total of  323.00  from holding Cathay Consolidated or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Cathay Consolidated  vs.  Eclat Textile Co

Cathay Consolidated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Consolidated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cathay Consolidated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eclat Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eclat Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Eclat Textile is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cathay Consolidated and Eclat Textile

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

The idea behind Cathay Consolidated and Eclat Textile 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.