Correlation Between CTBC Financial and Fubon Financial
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Fubon Financial 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 Fubon Financial 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 Fubon Financial Holding, you can compare the effects of market volatilities on CTBC Financial and Fubon Financial 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 Fubon Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Fubon Financial.
Diversification Opportunities for CTBC Financial and Fubon Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between CTBC and Fubon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Fubon Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Financial Holding 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 Fubon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Financial Holding has no effect on the direction of CTBC Financial i.e., CTBC Financial and Fubon Financial go up and down completely randomly.
Pair Corralation between CTBC Financial and Fubon Financial
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.93 times more return on investment than Fubon Financial. However, CTBC Financial Holding is 1.08 times less risky than Fubon Financial. It trades about 0.06 of its potential returns per unit of risk. Fubon Financial Holding is currently generating about 0.03 per unit of risk. If you would invest 6,030 in CTBC Financial Holding on November 9, 2024 and sell it today you would earn a total of 260.00 from holding CTBC Financial Holding or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Fubon Financial Holding
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
Very Strong
Weak | Strong |
| Fubon Financial Holding |
Risk-Adjusted Performance
Strong
Weak | Strong |
CTBC Financial and Fubon Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Fubon Financial
The main advantage of trading using opposite CTBC Financial and Fubon Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Fubon Financial 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 Fubon Financial will offset losses from the drop in Fubon Financial's long position.The idea behind CTBC Financial Holding and Fubon Financial Holding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |