Correlation Between CTBC Financial and Shanghai Commercial
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Shanghai Commercial 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 Shanghai Commercial 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 Shanghai Commercial Savings, you can compare the effects of market volatilities on CTBC Financial and Shanghai Commercial 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 Shanghai Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Shanghai Commercial.
Diversification Opportunities for CTBC Financial and Shanghai Commercial
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTBC and Shanghai is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Shanghai Commercial Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Commercial 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 Shanghai Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Commercial has no effect on the direction of CTBC Financial i.e., CTBC Financial and Shanghai Commercial go up and down completely randomly.
Pair Corralation between CTBC Financial and Shanghai Commercial
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.13 times more return on investment than Shanghai Commercial. However, CTBC Financial is 1.13 times more volatile than Shanghai Commercial Savings. It trades about 0.11 of its potential returns per unit of risk. Shanghai Commercial Savings is currently generating about 0.0 per unit of risk. If you would invest 2,140 in CTBC Financial Holding on November 29, 2024 and sell it today you would earn a total of 1,935 from holding CTBC Financial Holding or generate 90.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
CTBC Financial Holding vs. Shanghai Commercial Savings
Performance |
| Timeline |
| CTBC Financial Holding |
| Shanghai Commercial |
CTBC Financial and Shanghai Commercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Shanghai Commercial
The main advantage of trading using opposite CTBC Financial and Shanghai Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Shanghai Commercial 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 Shanghai Commercial will offset losses from the drop in Shanghai Commercial'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 |
| Shanghai Commercial vs. Mega Financial Holding | Shanghai Commercial vs. Yuanta Financial Holdings | Shanghai Commercial vs. ESUN Financial Holding | Shanghai Commercial vs. Taiwan Cooperative Financial |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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