Correlation Between IBF Financial and Taiwan Business
Can any of the company-specific risk be diversified away by investing in both IBF Financial and Taiwan Business 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 IBF Financial and Taiwan Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBF Financial Holdings and Taiwan Business Bank, you can compare the effects of market volatilities on IBF Financial and Taiwan Business 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 IBF Financial with a short position of Taiwan Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBF Financial and Taiwan Business.
Diversification Opportunities for IBF Financial and Taiwan Business
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IBF and Taiwan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding IBF Financial Holdings and Taiwan Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Business Bank and IBF 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 IBF Financial Holdings are associated (or correlated) with Taiwan Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Business Bank has no effect on the direction of IBF Financial i.e., IBF Financial and Taiwan Business go up and down completely randomly.
Pair Corralation between IBF Financial and Taiwan Business
Assuming the 90 days trading horizon IBF Financial Holdings is expected to generate 0.96 times more return on investment than Taiwan Business. However, IBF Financial Holdings is 1.04 times less risky than Taiwan Business. It trades about 0.05 of its potential returns per unit of risk. Taiwan Business Bank is currently generating about 0.03 per unit of risk. If you would invest 1,140 in IBF Financial Holdings on August 30, 2024 and sell it today you would earn a total of 305.00 from holding IBF Financial Holdings or generate 26.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IBF Financial Holdings vs. Taiwan Business Bank
Performance |
| Timeline |
| IBF Financial Holdings |
| Taiwan Business Bank |
IBF Financial and Taiwan Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IBF Financial and Taiwan Business
The main advantage of trading using opposite IBF Financial and Taiwan Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBF Financial position performs unexpectedly, Taiwan Business 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 Taiwan Business will offset losses from the drop in Taiwan Business' long position.| IBF Financial vs. Taiwan Secom Co | IBF Financial vs. TTET Union Corp | IBF Financial vs. China Steel Chemical | IBF Financial vs. Taiwan Shin Kong |
| Taiwan Business vs. First Financial Holding | Taiwan Business vs. Chang Hwa Commercial | Taiwan Business vs. Sinopac Financial Holdings | Taiwan Business vs. Taishin 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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