Correlation Between CTBC Financial and Union Bank
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on CTBC Financial and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Union Bank.
Diversification Opportunities for CTBC Financial and Union Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTBC and Union is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of CTBC Financial i.e., CTBC Financial and Union Bank go up and down completely randomly.
Pair Corralation between CTBC Financial and Union Bank
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.5 times more return on investment than Union Bank. However, CTBC Financial is 1.5 times more volatile than Union Bank of. It trades about 0.16 of its potential returns per unit of risk. Union Bank of is currently generating about 0.0 per unit of risk. If you would invest 3,310 in CTBC Financial Holding on September 2, 2024 and sell it today you would earn a total of 430.00 from holding CTBC Financial Holding or generate 12.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Union Bank of
Performance |
| Timeline |
| CTBC Financial Holding |
| Union Bank |
CTBC Financial and Union Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Union Bank
The main advantage of trading using opposite CTBC Financial and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Union Bank 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 Union Bank will offset losses from the drop in Union Bank's long position.The idea behind CTBC Financial Holding and Union Bank of 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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