Correlation Between CTBC Financial and Jia Jie
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Jia Jie 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 Jia Jie 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 Jia Jie Biomedical, you can compare the effects of market volatilities on CTBC Financial and Jia Jie 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 Jia Jie. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Jia Jie.
Diversification Opportunities for CTBC Financial and Jia Jie
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTBC and Jia is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Jia Jie Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jia Jie Biomedical 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 Jia Jie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jia Jie Biomedical has no effect on the direction of CTBC Financial i.e., CTBC Financial and Jia Jie go up and down completely randomly.
Pair Corralation between CTBC Financial and Jia Jie
Assuming the 90 days trading horizon CTBC Financial is expected to generate 13.01 times less return on investment than Jia Jie. But when comparing it to its historical volatility, CTBC Financial Holding is 11.35 times less risky than Jia Jie. It trades about 0.04 of its potential returns per unit of risk. Jia Jie Biomedical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,417 in Jia Jie Biomedical on November 4, 2024 and sell it today you would earn a total of 703.00 from holding Jia Jie Biomedical or generate 49.61% 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. Jia Jie Biomedical
Performance |
| Timeline |
| CTBC Financial Holding |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Jia Jie Biomedical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CTBC Financial and Jia Jie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Jia Jie
The main advantage of trading using opposite CTBC Financial and Jia Jie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Jia Jie 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 Jia Jie will offset losses from the drop in Jia Jie's long position.The idea behind CTBC Financial Holding and Jia Jie Biomedical 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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