Correlation Between CTBC Financial and Taiwan Taomee
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Taiwan Taomee 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 Taiwan Taomee 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 Taiwan Taomee Co, you can compare the effects of market volatilities on CTBC Financial and Taiwan Taomee 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 Taiwan Taomee. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Taiwan Taomee.
Diversification Opportunities for CTBC Financial and Taiwan Taomee
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CTBC and Taiwan is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Taiwan Taomee Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taomee 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 Taiwan Taomee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taomee has no effect on the direction of CTBC Financial i.e., CTBC Financial and Taiwan Taomee go up and down completely randomly.
Pair Corralation between CTBC Financial and Taiwan Taomee
Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.14 times less return on investment than Taiwan Taomee. But when comparing it to its historical volatility, CTBC Financial Holding is 5.19 times less risky than Taiwan Taomee. It trades about 0.1 of its potential returns per unit of risk. Taiwan Taomee Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,060 in Taiwan Taomee Co on September 1, 2024 and sell it today you would earn a total of 5.00 from holding Taiwan Taomee Co or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CTBC Financial Holding vs. Taiwan Taomee Co
Performance |
| Timeline |
| CTBC Financial Holding |
| Taiwan Taomee |
CTBC Financial and Taiwan Taomee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTBC Financial and Taiwan Taomee
The main advantage of trading using opposite CTBC Financial and Taiwan Taomee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Taiwan Taomee 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 Taiwan Taomee will offset losses from the drop in Taiwan Taomee'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 |
| Taiwan Taomee vs. Chi Sheng Chemical | Taiwan Taomee vs. Professional Computer Technology | Taiwan Taomee vs. Trade Van Information Services | Taiwan Taomee vs. RiTdisplay Corp |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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