Correlation Between CTBC Financial and Chief Telecom
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Chief Telecom 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 Chief Telecom 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 Chief Telecom, you can compare the effects of market volatilities on CTBC Financial and Chief Telecom 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 Chief Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Chief Telecom.
Diversification Opportunities for CTBC Financial and Chief Telecom
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CTBC and Chief is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Chief Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chief Telecom 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 Chief Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chief Telecom has no effect on the direction of CTBC Financial i.e., CTBC Financial and Chief Telecom go up and down completely randomly.
Pair Corralation between CTBC Financial and Chief Telecom
Assuming the 90 days trading horizon CTBC Financial is expected to generate 2.16 times less return on investment than Chief Telecom. But when comparing it to its historical volatility, CTBC Financial Holding is 18.27 times less risky than Chief Telecom. It trades about 0.29 of its potential returns per unit of risk. Chief Telecom is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 41,400 in Chief Telecom on November 3, 2024 and sell it today you would earn a total of 2,850 from holding Chief Telecom or generate 6.88% 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. Chief Telecom
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
| Chief Telecom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CTBC Financial and Chief Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Chief Telecom
The main advantage of trading using opposite CTBC Financial and Chief Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Chief Telecom 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 Chief Telecom will offset losses from the drop in Chief Telecom's long position.The idea behind CTBC Financial Holding and Chief Telecom 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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