Correlation Between CTBC USD and YuantaP Shares

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

By analyzing existing cross correlation between CTBC USD Corporate and YuantaP shares Taiwan Top, you can compare the effects of market volatilities on CTBC USD and YuantaP Shares 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 USD with a short position of YuantaP Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC USD and YuantaP Shares.

Diversification Opportunities for CTBC USD and YuantaP Shares

-0.53

Correlation Coefficient

CTBC USD  YuantaP Shares

Excellent diversification

The 3 months correlation between CTBC and YuantaP is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CTBC USD Corporate and YuantaP shares Taiwan Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YuantaP shares Taiwan and CTBC USD 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 USD Corporate are associated (or correlated) with YuantaP Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YuantaP shares Taiwan has no effect on the direction of CTBC USD i.e., CTBC USD and YuantaP Shares go up and down completely randomly.

Pair Corralation between CTBC USD and YuantaP Shares

Assuming the 90 days trading horizon CTBC USD is expected to generate 8.87 times less return on investment than YuantaP Shares. But when comparing it to its historical volatility, CTBC USD Corporate is 2.83 times less risky than YuantaP Shares. It trades about 0.04 of its potential returns per unit of risk. YuantaP shares Taiwan Top is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  12,766  in YuantaP shares Taiwan Top on September 28, 2024 and sell it today you would earn a total of  7,059  from holding YuantaP shares Taiwan Top or generate 55.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.74%
Values	Daily Returns

CTBC USD Corporate  vs.  YuantaP shares Taiwan Top

CTBC USD Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC USD Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CTBC USD is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

YuantaP shares Taiwan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares Taiwan Top are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, YuantaP Shares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CTBC USD and YuantaP Shares

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

The idea behind CTBC USD Corporate and YuantaP shares Taiwan Top 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.