Correlation Between Cathay General and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Cathay General and First Bancorp 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 General and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cathay General Bancorp and First Bancorp, you can compare the effects of market volatilities on Cathay General and First Bancorp 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 General with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay General and First Bancorp.
Diversification Opportunities for Cathay General and First Bancorp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cathay General Bancorp and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Cathay General 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 General Bancorp are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Cathay General i.e., Cathay General and First Bancorp go up and down completely randomly.
Pair Corralation between Cathay General and First Bancorp
Given the investment horizon of 90 days Cathay General Bancorp is expected to generate 1.11 times more return on investment than First Bancorp. However, Cathay General is 1.11 times more volatile than First Bancorp. It trades about -0.02 of its potential returns per unit of risk. First Bancorp is currently generating about -0.1 per unit of risk. If you would invest 5,002 in Cathay General Bancorp on September 4, 2025 and sell it today you would lose (141.00) from holding Cathay General Bancorp or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay General Bancorp vs. First Bancorp
Performance |
| Timeline |
| Cathay General Bancorp |
| First Bancorp |
Cathay General and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay General and First Bancorp
The main advantage of trading using opposite Cathay General and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay General position performs unexpectedly, First Bancorp 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| Cathay General vs. Minerals Technologies | Cathay General vs. Day Tradexchange | Cathay General vs. TeraForce Technology | Cathay General vs. H2O Retailing |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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