Correlation Between Elite Semiconductor and CTBC Financial
Can any of the company-specific risk be diversified away by investing in both Elite Semiconductor and CTBC Financial 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 Elite Semiconductor and CTBC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elite Semiconductor Memory and CTBC Financial Holding, you can compare the effects of market volatilities on Elite Semiconductor and CTBC Financial 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 Elite Semiconductor with a short position of CTBC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elite Semiconductor and CTBC Financial.
Diversification Opportunities for Elite Semiconductor and CTBC Financial
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Elite and CTBC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Elite Semiconductor Memory and CTBC Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Financial Holding and Elite Semiconductor 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 Elite Semiconductor Memory are associated (or correlated) with CTBC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Financial Holding has no effect on the direction of Elite Semiconductor i.e., Elite Semiconductor and CTBC Financial go up and down completely randomly.
Pair Corralation between Elite Semiconductor and CTBC Financial
Assuming the 90 days trading horizon Elite Semiconductor Memory is expected to under-perform the CTBC Financial. In addition to that, Elite Semiconductor is 24.17 times more volatile than CTBC Financial Holding. It trades about -0.16 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.1 per unit of volatility. If you would invest 6,070 in CTBC Financial Holding on August 29, 2024 and sell it today you would earn a total of 10.00 from holding CTBC Financial Holding or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Elite Semiconductor Memory vs. CTBC Financial Holding
Performance |
| Timeline |
| Elite Semiconductor |
| CTBC Financial Holding |
Elite Semiconductor and CTBC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elite Semiconductor and CTBC Financial
The main advantage of trading using opposite Elite Semiconductor and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Semiconductor position performs unexpectedly, CTBC Financial 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 CTBC Financial will offset losses from the drop in CTBC Financial's long position.The idea behind Elite Semiconductor Memory and CTBC Financial Holding 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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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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