Correlation Between CTBC Financial and Deltamac Taiwan
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Deltamac Taiwan 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 Deltamac Taiwan 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 Deltamac Taiwan Co, you can compare the effects of market volatilities on CTBC Financial and Deltamac Taiwan 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 Deltamac Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Deltamac Taiwan.
Diversification Opportunities for CTBC Financial and Deltamac Taiwan
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Deltamac is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Deltamac Taiwan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deltamac Taiwan 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 Deltamac Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deltamac Taiwan has no effect on the direction of CTBC Financial i.e., CTBC Financial and Deltamac Taiwan go up and down completely randomly.
Pair Corralation between CTBC Financial and Deltamac Taiwan
Assuming the 90 days trading horizon CTBC Financial is expected to generate 14.57 times less return on investment than Deltamac Taiwan. But when comparing it to its historical volatility, CTBC Financial Holding is 9.58 times less risky than Deltamac Taiwan. It trades about 0.09 of its potential returns per unit of risk. Deltamac Taiwan Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,805 in Deltamac Taiwan Co on November 2, 2024 and sell it today you would earn a total of 355.00 from holding Deltamac Taiwan Co or generate 12.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Deltamac Taiwan Co
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Deltamac Taiwan |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CTBC Financial and Deltamac Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Deltamac Taiwan
The main advantage of trading using opposite CTBC Financial and Deltamac Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Deltamac Taiwan 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 Deltamac Taiwan will offset losses from the drop in Deltamac Taiwan's long position.The idea behind CTBC Financial Holding and Deltamac Taiwan Co 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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