Correlation Between CTBC Financial and Louisa Professional
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Louisa Professional 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 CTBC Financial and Louisa Professional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTBC Financial Holding and Louisa Professional Coffee, you can compare the effects of market volatilities on CTBC Financial and Louisa Professional 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 CTBC Financial with a short position of Louisa Professional. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Louisa Professional.
Diversification Opportunities for CTBC Financial and Louisa Professional
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Louisa is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Louisa Professional Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Louisa Professional and CTBC 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 CTBC Financial Holding are associated (or correlated) with Louisa Professional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Louisa Professional has no effect on the direction of CTBC Financial i.e., CTBC Financial and Louisa Professional go up and down completely randomly.
Pair Corralation between CTBC Financial and Louisa Professional
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.83 times more return on investment than Louisa Professional. However, CTBC Financial Holding is 1.2 times less risky than Louisa Professional. It trades about 0.13 of its potential returns per unit of risk. Louisa Professional Coffee is currently generating about -0.4 per unit of risk. If you would invest 3,645 in CTBC Financial Holding on September 3, 2024 and sell it today you would earn a total of 95.00 from holding CTBC Financial Holding or generate 2.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Louisa Professional Coffee
Performance |
| Timeline |
| CTBC Financial Holding |
| Louisa Professional |
CTBC Financial and Louisa Professional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Louisa Professional
The main advantage of trading using opposite CTBC Financial and Louisa Professional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Louisa Professional 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 Louisa Professional will offset losses from the drop in Louisa Professional's long position.| CTBC Financial vs. Fubon Financial Holding | CTBC Financial vs. Cathay Financial Holding | CTBC Financial vs. Mega Financial Holding | CTBC Financial vs. First Financial Holding |
| Louisa Professional vs. Hi Lai Foods Co | Louisa Professional vs. Ruentex Development Co | Louisa Professional vs. Symtek Automation Asia | Louisa Professional vs. CTCI Corp |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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