Correlation Between CTBC Financial and Far EasTone
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Far EasTone 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 Far EasTone 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 Far EasTone Telecommunications, you can compare the effects of market volatilities on CTBC Financial and Far EasTone 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 Far EasTone. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Far EasTone.
Diversification Opportunities for CTBC Financial and Far EasTone
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CTBC and Far is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Far EasTone Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far EasTone Telecomm 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 Far EasTone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far EasTone Telecomm has no effect on the direction of CTBC Financial i.e., CTBC Financial and Far EasTone go up and down completely randomly.
Pair Corralation between CTBC Financial and Far EasTone
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.93 times more return on investment than Far EasTone. However, CTBC Financial Holding is 1.08 times less risky than Far EasTone. It trades about 0.14 of its potential returns per unit of risk. Far EasTone Telecommunications is currently generating about -0.02 per unit of risk. If you would invest 3,590 in CTBC Financial Holding on October 24, 2024 and sell it today you would earn a total of 310.00 from holding CTBC Financial Holding or generate 8.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Far EasTone Telecommunications
Performance |
| Timeline |
| CTBC Financial Holding |
| Far EasTone Telecomm |
CTBC Financial and Far EasTone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Far EasTone
The main advantage of trading using opposite CTBC Financial and Far EasTone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Far EasTone 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 Far EasTone will offset losses from the drop in Far EasTone'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 |
| Far EasTone vs. Taiwan Mobile Co | Far EasTone vs. Chunghwa Telecom Co | Far EasTone vs. President Chain Store | Far EasTone vs. Formosa Petrochemical 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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