Correlation Between CTBC Financial and Vanguard International
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Vanguard International 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 Vanguard International 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 Vanguard International Semiconductor, you can compare the effects of market volatilities on CTBC Financial and Vanguard International 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 Vanguard International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Vanguard International.
Diversification Opportunities for CTBC Financial and Vanguard International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CTBC and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Vanguard International Semicon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International 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 Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of CTBC Financial i.e., CTBC Financial and Vanguard International go up and down completely randomly.
Pair Corralation between CTBC Financial and Vanguard International
Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.17 times more return on investment than Vanguard International. However, CTBC Financial Holding is 5.81 times less risky than Vanguard International. It trades about -0.19 of its potential returns per unit of risk. Vanguard International Semiconductor is currently generating about -0.33 per unit of risk. If you would invest 5,650 in CTBC Financial Holding on August 28, 2024 and sell it today you would lose (50.00) from holding CTBC Financial Holding or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CTBC Financial Holding vs. Vanguard International Semicon
Performance |
| Timeline |
| CTBC Financial Holding |
| Vanguard International |
CTBC Financial and Vanguard International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Vanguard International
The main advantage of trading using opposite CTBC Financial and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Vanguard International 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 Vanguard International will offset losses from the drop in Vanguard International'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 |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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