Correlation Between China Development and CTBC Financial
Can any of the company-specific risk be diversified away by investing in both China Development and CTBC 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 China Development and CTBC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and CTBC Financial Holding, you can compare the effects of market volatilities on China Development and CTBC 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 China Development with a short position of CTBC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and CTBC Financial.
Diversification Opportunities for China Development and CTBC Financial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between China and CTBC is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and CTBC Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Financial Holding and China Development 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 China Development Financial are associated (or correlated) with CTBC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Financial Holding has no effect on the direction of China Development i.e., China Development and CTBC Financial go up and down completely randomly.
Pair Corralation between China Development and CTBC Financial
Assuming the 90 days trading horizon China Development is expected to generate 2.17 times less return on investment than CTBC Financial. In addition to that, China Development is 1.08 times more volatile than CTBC Financial Holding. It trades about 0.08 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.2 per unit of volatility. If you would invest 3,590 in CTBC Financial Holding on August 27, 2024 and sell it today you would earn a total of 145.00 from holding CTBC Financial Holding or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. CTBC Financial Holding
Performance |
| Timeline |
| China Development |
| CTBC Financial Holding |
China Development and CTBC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and CTBC Financial
The main advantage of trading using opposite China Development and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, CTBC 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 CTBC Financial will offset losses from the drop in CTBC Financial's long position.| China Development vs. Cathay Financial Holding | China Development vs. Mega Financial Holding | China Development vs. CTBC Financial Holding | China Development vs. Fubon Financial Holding |
| CTBC Financial vs. Fubon Financial Holding | CTBC Financial vs. Cathay Financial Holding | CTBC Financial vs. Mega Financial Holding | CTBC Financial vs. First Financial Holding |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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