Correlation Between CTBC Financial and Arich Enterprise
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Arich Enterprise 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 Arich Enterprise 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 Arich Enterprise Co, you can compare the effects of market volatilities on CTBC Financial and Arich Enterprise 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 Arich Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Arich Enterprise.
Diversification Opportunities for CTBC Financial and Arich Enterprise
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Arich is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Arich Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arich Enterprise 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 Arich Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arich Enterprise has no effect on the direction of CTBC Financial i.e., CTBC Financial and Arich Enterprise go up and down completely randomly.
Pair Corralation between CTBC Financial and Arich Enterprise
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.93 times more return on investment than Arich Enterprise. However, CTBC Financial Holding is 1.08 times less risky than Arich Enterprise. It trades about 0.1 of its potential returns per unit of risk. Arich Enterprise Co is currently generating about 0.01 per unit of risk. If you would invest 2,241 in CTBC Financial Holding on August 31, 2024 and sell it today you would earn a total of 1,534 from holding CTBC Financial Holding or generate 68.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
CTBC Financial Holding vs. Arich Enterprise Co
Performance |
| Timeline |
| CTBC Financial Holding |
| Arich Enterprise |
CTBC Financial and Arich Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Arich Enterprise
The main advantage of trading using opposite CTBC Financial and Arich Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Arich Enterprise 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 Arich Enterprise will offset losses from the drop in Arich Enterprise'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 |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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