Correlation Between CTBC USD and Paradigm

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

Diversification Opportunities for CTBC USD and Paradigm

-0.17

Correlation Coefficient

CTBC USD  Paradigm

Good diversification

The 3 months correlation between CTBC and Paradigm is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding CTBC USD Corporate and Paradigm SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm SP GSCI 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 Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm SP GSCI has no effect on the direction of CTBC USD i.e., CTBC USD and Paradigm go up and down completely randomly.

Pair Corralation between CTBC USD and Paradigm

Assuming the 90 days trading horizon CTBC USD Corporate is expected to under-perform the Paradigm. But the etf apears to be less risky and, when comparing its historical volatility, CTBC USD Corporate is 2.16 times less risky than Paradigm. The etf trades about -0.06 of its potential returns per unit of risk. The Paradigm SP GSCI is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,901  in Paradigm SP GSCI on October 20, 2024 and sell it today you would earn a total of  152.00  from holding Paradigm SP GSCI or generate 8.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CTBC USD Corporate  vs.  Paradigm SP GSCI

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.

Paradigm SP GSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm SP GSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Paradigm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CTBC USD and Paradigm

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

The idea behind CTBC USD Corporate and Paradigm SP GSCI 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.