Correlation Between CTBC Financial and Falcon Power
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Falcon Power 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 Falcon Power 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 Falcon Power Co, you can compare the effects of market volatilities on CTBC Financial and Falcon Power 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 Falcon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Falcon Power.
Diversification Opportunities for CTBC Financial and Falcon Power
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CTBC and Falcon is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Falcon Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Power 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 Falcon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Power has no effect on the direction of CTBC Financial i.e., CTBC Financial and Falcon Power go up and down completely randomly.
Pair Corralation between CTBC Financial and Falcon Power
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.07 times more return on investment than Falcon Power. However, CTBC Financial Holding is 14.16 times less risky than Falcon Power. It trades about 0.41 of its potential returns per unit of risk. Falcon Power Co is currently generating about -0.16 per unit of risk. If you would invest 5,770 in CTBC Financial Holding on November 5, 2024 and sell it today you would earn a total of 70.00 from holding CTBC Financial Holding or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Falcon Power Co
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Falcon Power |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CTBC Financial and Falcon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Falcon Power
The main advantage of trading using opposite CTBC Financial and Falcon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Falcon Power 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 Falcon Power will offset losses from the drop in Falcon Power's long position.The idea behind CTBC Financial Holding and Falcon Power Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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