Correlation Between CTBC USD and CTBC Treasury

Can any of the company-specific risk be diversified away by investing in both CTBC USD and CTBC Treasury 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 CTBC Treasury 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 CTBC Treasury 20, you can compare the effects of market volatilities on CTBC USD and CTBC Treasury 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 CTBC Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC USD and CTBC Treasury.

Diversification Opportunities for CTBC USD and CTBC Treasury

0.99

Correlation Coefficient

CTBC USD  CTBC Treasury

No risk reduction

The 3 months correlation between CTBC and CTBC is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding CTBC USD Corporate and CTBC Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Treasury 20 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 CTBC Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Treasury 20 has no effect on the direction of CTBC USD i.e., CTBC USD and CTBC Treasury go up and down completely randomly.

Pair Corralation between CTBC USD and CTBC Treasury

Assuming the 90 days trading horizon CTBC USD is expected to generate 1.35 times less return on investment than CTBC Treasury. But when comparing it to its historical volatility, CTBC USD Corporate is 1.31 times less risky than CTBC Treasury. It trades about 0.12 of its potential returns per unit of risk. CTBC Treasury 20 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,846  in CTBC Treasury 20 on December 24, 2024 and sell it today you would earn a total of  158.00  from holding CTBC Treasury 20 or generate 5.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

CTBC USD Corporate  vs.  CTBC Treasury 20

CTBC USD Corporate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC USD Corporate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC USD is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CTBC Treasury 20

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Treasury 20 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CTBC USD and CTBC Treasury

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

The idea behind CTBC USD Corporate and CTBC Treasury 20 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.