Correlation Between Taiwan Cooperative and CTBC Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Cooperative 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 Taiwan Cooperative and CTBC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Cooperative Financial and CTBC Financial Holding, you can compare the effects of market volatilities on Taiwan Cooperative 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 Taiwan Cooperative with a short position of CTBC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Cooperative and CTBC Financial.
Diversification Opportunities for Taiwan Cooperative and CTBC Financial
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Taiwan and CTBC is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Cooperative Financial 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 Taiwan Cooperative 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 Taiwan Cooperative Financial 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 Taiwan Cooperative i.e., Taiwan Cooperative and CTBC Financial go up and down completely randomly.
Pair Corralation between Taiwan Cooperative and CTBC Financial
Assuming the 90 days trading horizon Taiwan Cooperative Financial is expected to under-perform the CTBC Financial. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Cooperative Financial is 1.38 times less risky than CTBC Financial. The stock trades about -0.02 of its potential returns per unit of risk. The CTBC Financial Holding is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,640 in CTBC Financial Holding on September 1, 2024 and sell it today you would earn a total of 100.00 from holding CTBC Financial Holding or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Taiwan Cooperative Financial vs. CTBC Financial Holding
Performance |
| Timeline |
| Taiwan Cooperative |
| CTBC Financial Holding |
Taiwan Cooperative and CTBC Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Taiwan Cooperative and CTBC Financial
The main advantage of trading using opposite Taiwan Cooperative and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Cooperative 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.| Taiwan Cooperative vs. Central Reinsurance Corp | Taiwan Cooperative vs. Huaku Development Co | Taiwan Cooperative vs. Fubon Financial Holding |
| CTBC Financial vs. Central Reinsurance Corp | CTBC Financial vs. Huaku Development Co | CTBC Financial vs. Fubon Financial Holding |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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