Correlation Between Yuanta Daily and CTBC TIP

Can any of the company-specific risk be diversified away by investing in both Yuanta Daily and CTBC TIP 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 Yuanta Daily and CTBC TIP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuanta Daily Taiwan and CTBC TIP Customized, you can compare the effects of market volatilities on Yuanta Daily and CTBC TIP 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 Yuanta Daily with a short position of CTBC TIP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta Daily and CTBC TIP.

Diversification Opportunities for Yuanta Daily and CTBC TIP

-0.58

Correlation Coefficient

Yuanta Daily  CTBC TIP

Excellent diversification

The 3 months correlation between Yuanta and CTBC is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Daily Taiwan and CTBC TIP Customized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC TIP Customized and Yuanta Daily 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 Yuanta Daily Taiwan are associated (or correlated) with CTBC TIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC TIP Customized has no effect on the direction of Yuanta Daily i.e., Yuanta Daily and CTBC TIP go up and down completely randomly.

Pair Corralation between Yuanta Daily and CTBC TIP

Assuming the 90 days trading horizon Yuanta Daily Taiwan is expected to under-perform the CTBC TIP. In addition to that, Yuanta Daily is 1.36 times more volatile than CTBC TIP Customized. It trades about -0.04 of its total potential returns per unit of risk. CTBC TIP Customized is currently generating about -0.03 per unit of volatility. If you would invest  1,816  in CTBC TIP Customized on October 24, 2024 and sell it today you would lose (11.00) from holding CTBC TIP Customized or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Yuanta Daily Taiwan  vs.  CTBC TIP Customized

Yuanta Daily Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily Taiwan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yuanta Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

CTBC TIP Customized

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC TIP Customized has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTBC TIP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Yuanta Daily and CTBC TIP

The main advantage of trading using opposite Yuanta Daily and CTBC TIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuanta Daily position performs unexpectedly, CTBC TIP 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 TIP will offset losses from the drop in CTBC TIP's long position.

The idea behind Yuanta Daily Taiwan and CTBC TIP Customized 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.