Correlation Between CTBC Financial and President Securities
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and President Securities 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 President Securities 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 President Securities Corp, you can compare the effects of market volatilities on CTBC Financial and President Securities 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 President Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and President Securities.
Diversification Opportunities for CTBC Financial and President Securities
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between CTBC and President is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and President Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Securities Corp 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 President Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Securities Corp has no effect on the direction of CTBC Financial i.e., CTBC Financial and President Securities go up and down completely randomly.
Pair Corralation between CTBC Financial and President Securities
Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.43 times less return on investment than President Securities. But when comparing it to its historical volatility, CTBC Financial Holding is 2.12 times less risky than President Securities. It trades about 0.09 of its potential returns per unit of risk. President Securities Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,580 in President Securities Corp on November 2, 2024 and sell it today you would earn a total of 35.00 from holding President Securities Corp or generate 1.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. President Securities Corp
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| President Securities Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
CTBC Financial and President Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and President Securities
The main advantage of trading using opposite CTBC Financial and President Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, President Securities 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 President Securities will offset losses from the drop in President Securities' long position.The idea behind CTBC Financial Holding and President Securities Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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