Correlation Between CTBC Financial and Acbel Polytech
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Acbel Polytech 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 Acbel Polytech 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 Acbel Polytech, you can compare the effects of market volatilities on CTBC Financial and Acbel Polytech 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 Acbel Polytech. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Acbel Polytech.
Diversification Opportunities for CTBC Financial and Acbel Polytech
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Acbel is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Acbel Polytech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acbel Polytech 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 Acbel Polytech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acbel Polytech has no effect on the direction of CTBC Financial i.e., CTBC Financial and Acbel Polytech go up and down completely randomly.
Pair Corralation between CTBC Financial and Acbel Polytech
Assuming the 90 days trading horizon CTBC Financial Holding is expected to under-perform the Acbel Polytech. But the stock apears to be less risky and, when comparing its historical volatility, CTBC Financial Holding is 1.98 times less risky than Acbel Polytech. The stock trades about -0.07 of its potential returns per unit of risk. The Acbel Polytech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,060 in Acbel Polytech on November 5, 2024 and sell it today you would earn a total of 10.00 from holding Acbel Polytech or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Acbel Polytech
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Acbel Polytech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CTBC Financial and Acbel Polytech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Acbel Polytech
The main advantage of trading using opposite CTBC Financial and Acbel Polytech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Acbel Polytech 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 Acbel Polytech will offset losses from the drop in Acbel Polytech's long position.The idea behind CTBC Financial Holding and Acbel Polytech 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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