Correlation Between CTBC Financial and Excellence Optoelectronic
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Excellence Optoelectronic 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 Excellence Optoelectronic 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 Excellence Optoelectronic, you can compare the effects of market volatilities on CTBC Financial and Excellence Optoelectronic 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 Excellence Optoelectronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Excellence Optoelectronic.
Diversification Opportunities for CTBC Financial and Excellence Optoelectronic
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Excellence is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of CTBC Financial i.e., CTBC Financial and Excellence Optoelectronic go up and down completely randomly.
Pair Corralation between CTBC Financial and Excellence Optoelectronic
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.47 times more return on investment than Excellence Optoelectronic. However, CTBC Financial Holding is 2.13 times less risky than Excellence Optoelectronic. It trades about 0.05 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about 0.0 per unit of risk. If you would invest 3,600 in CTBC Financial Holding on October 26, 2024 and sell it today you would earn a total of 310.00 from holding CTBC Financial Holding or generate 8.61% 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. Excellence Optoelectronic
Performance |
| Timeline |
| CTBC Financial Holding |
| Excellence Optoelectronic |
CTBC Financial and Excellence Optoelectronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Excellence Optoelectronic
The main advantage of trading using opposite CTBC Financial and Excellence Optoelectronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Excellence Optoelectronic 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 Excellence Optoelectronic will offset losses from the drop in Excellence Optoelectronic'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 |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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