Correlation Between CTBC Financial and Pou Chen
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Pou Chen 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 Pou Chen 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 Pou Chen Corp, you can compare the effects of market volatilities on CTBC Financial and Pou Chen 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 Pou Chen. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Pou Chen.
Diversification Opportunities for CTBC Financial and Pou Chen
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CTBC and Pou is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Pou Chen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pou Chen Corp 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 Pou Chen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pou Chen Corp has no effect on the direction of CTBC Financial i.e., CTBC Financial and Pou Chen go up and down completely randomly.
Pair Corralation between CTBC Financial and Pou Chen
Assuming the 90 days trading horizon CTBC Financial is expected to generate 3.3 times less return on investment than Pou Chen. But when comparing it to its historical volatility, CTBC Financial Holding is 1.84 times less risky than Pou Chen. It trades about 0.24 of its potential returns per unit of risk. Pou Chen Corp is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 3,695 in Pou Chen Corp on August 25, 2024 and sell it today you would earn a total of 665.00 from holding Pou Chen Corp or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Pou Chen Corp
Performance |
| Timeline |
| CTBC Financial Holding |
| Pou Chen Corp |
CTBC Financial and Pou Chen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Pou Chen
The main advantage of trading using opposite CTBC Financial and Pou Chen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Pou Chen 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 Pou Chen will offset losses from the drop in Pou Chen'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 |
| Pou Chen vs. Taiwan Semiconductor Manufacturing | Pou Chen vs. Hon Hai Precision | Pou Chen vs. MediaTek | Pou Chen vs. Chunghwa Telecom Co |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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