Correlation Between Cathay Financial and Li Kang
Can any of the company-specific risk be diversified away by investing in both Cathay Financial and Li Kang 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 Li Kang 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 Li Kang Biomedical, you can compare the effects of market volatilities on Cathay Financial and Li Kang 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 Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Financial and Li Kang.
Diversification Opportunities for Cathay Financial and Li Kang
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cathay and 6242 is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Financial Holding and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical 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 Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of Cathay Financial i.e., Cathay Financial and Li Kang go up and down completely randomly.
Pair Corralation between Cathay Financial and Li Kang
Assuming the 90 days trading horizon Cathay Financial Holding is expected to under-perform the Li Kang. But the stock apears to be less risky and, when comparing its historical volatility, Cathay Financial Holding is 1.78 times less risky than Li Kang. The stock trades about -0.03 of its potential returns per unit of risk. The Li Kang Biomedical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,826 in Li Kang Biomedical on April 13, 2024 and sell it today you would earn a total of 64.00 from holding Li Kang Biomedical or generate 1.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cathay Financial Holding vs. Li Kang Biomedical
Performance |
Timeline |
Cathay Financial Holding |
Li Kang Biomedical |
Cathay Financial and Li Kang Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cathay Financial and Li Kang
The main advantage of trading using opposite Cathay Financial and Li Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Financial position performs unexpectedly, Li Kang 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 Li Kang will offset losses from the drop in Li Kang's long position.Cathay Financial vs. Mercuries Life Insurance | Cathay Financial vs. Symtek Automation Asia | Cathay Financial vs. WiseChip Semiconductor | Cathay Financial vs. Novatek Microelectronics Corp |
Li Kang vs. Fwusow Industry Co | Li Kang vs. Ruentex Development Co | Li Kang vs. Symtek Automation Asia | Li Kang vs. WiseChip Semiconductor |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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