Correlation Between Taiwan Business and IBF Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Business and IBF 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 Taiwan Business and IBF Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Business Bank and IBF Financial Holdings, you can compare the effects of market volatilities on Taiwan Business and IBF 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 Taiwan Business with a short position of IBF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Business and IBF Financial.
Diversification Opportunities for Taiwan Business and IBF Financial
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Taiwan and IBF is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Business Bank and IBF Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBF Financial Holdings and Taiwan Business 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 Taiwan Business Bank are associated (or correlated) with IBF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBF Financial Holdings has no effect on the direction of Taiwan Business i.e., Taiwan Business and IBF Financial go up and down completely randomly.
Pair Corralation between Taiwan Business and IBF Financial
Assuming the 90 days trading horizon Taiwan Business Bank is expected to generate 0.64 times more return on investment than IBF Financial. However, Taiwan Business Bank is 1.57 times less risky than IBF Financial. It trades about 0.11 of its potential returns per unit of risk. IBF Financial Holdings is currently generating about -0.17 per unit of risk. If you would invest 1,485 in Taiwan Business Bank on November 2, 2024 and sell it today you would earn a total of 20.00 from holding Taiwan Business Bank or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Business Bank vs. IBF Financial Holdings
Performance |
| Timeline |
| Taiwan Business Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| IBF Financial Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Taiwan Business and IBF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Business and IBF Financial
The main advantage of trading using opposite Taiwan Business and IBF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Business position performs unexpectedly, IBF 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 IBF Financial will offset losses from the drop in IBF Financial's long position.The idea behind Taiwan Business Bank and IBF Financial Holdings 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |