Correlation Between ESUN Financial and Taichung Commercial
Can any of the company-specific risk be diversified away by investing in both ESUN Financial and Taichung Commercial 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 ESUN Financial and Taichung Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESUN Financial Holding and Taichung Commercial Bank, you can compare the effects of market volatilities on ESUN Financial and Taichung Commercial 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 ESUN Financial with a short position of Taichung Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESUN Financial and Taichung Commercial.
Diversification Opportunities for ESUN Financial and Taichung Commercial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESUN and Taichung is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ESUN Financial Holding and Taichung Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taichung Commercial Bank and ESUN 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 ESUN Financial Holding are associated (or correlated) with Taichung Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taichung Commercial Bank has no effect on the direction of ESUN Financial i.e., ESUN Financial and Taichung Commercial go up and down completely randomly.
Pair Corralation between ESUN Financial and Taichung Commercial
Assuming the 90 days trading horizon ESUN Financial Holding is expected to under-perform the Taichung Commercial. In addition to that, ESUN Financial is 1.02 times more volatile than Taichung Commercial Bank. It trades about 0.0 of its total potential returns per unit of risk. Taichung Commercial Bank is currently generating about 0.19 per unit of volatility. If you would invest 1,790 in Taichung Commercial Bank on August 29, 2024 and sell it today you would earn a total of 70.00 from holding Taichung Commercial Bank or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESUN Financial Holding vs. Taichung Commercial Bank
Performance |
| Timeline |
| ESUN Financial Holding |
| Taichung Commercial Bank |
ESUN Financial and Taichung Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESUN Financial and Taichung Commercial
The main advantage of trading using opposite ESUN Financial and Taichung Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESUN Financial position performs unexpectedly, Taichung Commercial 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 Taichung Commercial will offset losses from the drop in Taichung Commercial's long position.| ESUN Financial vs. Mega Financial Holding | ESUN Financial vs. CTBC Financial Holding | ESUN Financial vs. First Financial Holding | ESUN Financial vs. Fubon Financial Holding |
| Taichung Commercial vs. Taiwan Business Bank | Taichung Commercial vs. Taishin Financial Holding | Taichung Commercial vs. Hua Nan Financial | Taichung Commercial vs. ESUN 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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