Correlation Between CTBC Financial and Prime Oil
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Prime Oil 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 Prime Oil 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 Prime Oil Chemical, you can compare the effects of market volatilities on CTBC Financial and Prime Oil 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 Prime Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Prime Oil.
Diversification Opportunities for CTBC Financial and Prime Oil
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CTBC and Prime is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Prime Oil Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Oil Chemical 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 Prime Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Oil Chemical has no effect on the direction of CTBC Financial i.e., CTBC Financial and Prime Oil go up and down completely randomly.
Pair Corralation between CTBC Financial and Prime Oil
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.32 times more return on investment than Prime Oil. However, CTBC Financial Holding is 3.11 times less risky than Prime Oil. It trades about -0.05 of its potential returns per unit of risk. Prime Oil Chemical is currently generating about -0.03 per unit of risk. If you would invest 5,678 in CTBC Financial Holding on August 24, 2024 and sell it today you would lose (98.00) from holding CTBC Financial Holding or give up 1.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Prime Oil Chemical
Performance |
| Timeline |
| CTBC Financial Holding |
| Prime Oil Chemical |
CTBC Financial and Prime Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Prime Oil
The main advantage of trading using opposite CTBC Financial and Prime Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Prime Oil 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 Prime Oil will offset losses from the drop in Prime Oil's long position.| CTBC Financial vs. Cathay Financial Holding | CTBC Financial vs. Cathay Financial Holding | CTBC Financial vs. Fubon Financial Holding | CTBC Financial vs. Mercuries Life Insurance |
| Prime Oil vs. President Chain Store | Prime Oil vs. Huaku Development Co | Prime Oil vs. Formosa International Hotels | Prime Oil vs. Mercuries Associates Holding |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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