Correlation Between CTBC Financial and Pontex Polyblend

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Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Pontex Polyblend 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 Pontex Polyblend 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 Pontex Polyblend CoLtd, you can compare the effects of market volatilities on CTBC Financial and Pontex Polyblend 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 Pontex Polyblend. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Pontex Polyblend.

Diversification Opportunities for CTBC Financial and Pontex Polyblend

-0.85
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between CTBC and Pontex is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Pontex Polyblend CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pontex Polyblend CoLtd 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 Pontex Polyblend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pontex Polyblend CoLtd has no effect on the direction of CTBC Financial i.e., CTBC Financial and Pontex Polyblend go up and down completely randomly.

Pair Corralation between CTBC Financial and Pontex Polyblend

Assuming the 90 days trading horizon CTBC Financial Holding is expected to under-perform the Pontex Polyblend. But the stock apears to be less risky and, when comparing its historical volatility, CTBC Financial Holding is 15.63 times less risky than Pontex Polyblend. The stock trades about -0.18 of its potential returns per unit of risk. The Pontex Polyblend CoLtd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,030  in Pontex Polyblend CoLtd on August 29, 2024 and sell it today you would earn a total of  155.00  from holding Pontex Polyblend CoLtd or generate 7.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CTBC Financial Holding  vs.  Pontex Polyblend CoLtd

 Performance 
       Timeline  
CTBC Financial Holding 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CTBC Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTBC Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Pontex Polyblend CoLtd 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pontex Polyblend CoLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pontex Polyblend showed solid returns over the last few months and may actually be approaching a breakup point.

CTBC Financial and Pontex Polyblend Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CTBC Financial and Pontex Polyblend

The main advantage of trading using opposite CTBC Financial and Pontex Polyblend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Pontex Polyblend 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 Pontex Polyblend will offset losses from the drop in Pontex Polyblend's long position.
The idea behind CTBC Financial Holding and Pontex Polyblend CoLtd 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.
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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