Correlation Between CTBC USD and CTBC 20

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

Diversification Opportunities for CTBC USD and CTBC 20

0.94

Correlation Coefficient

CTBC USD  CTBC 20

Almost no diversification

The 3 months correlation between CTBC and CTBC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CTBC USD Corporate and CTBC 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC 20 Year 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 20. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC 20 Year has no effect on the direction of CTBC USD i.e., CTBC USD and CTBC 20 go up and down completely randomly.

Pair Corralation between CTBC USD and CTBC 20

Assuming the 90 days trading horizon CTBC USD Corporate is expected to generate 0.78 times more return on investment than CTBC 20. However, CTBC USD Corporate is 1.28 times less risky than CTBC 20. It trades about -0.37 of its potential returns per unit of risk. CTBC 20 Year is currently generating about -0.4 per unit of risk. If you would invest  3,671  in CTBC USD Corporate on October 8, 2024 and sell it today you would lose (138.00) from holding CTBC USD Corporate or give up 3.76% of portfolio value 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 20 Year

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 current stock price disturbance, may contribute to short-term losses for the investors.

CTBC 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CTBC 20 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 20

The main advantage of trading using opposite CTBC USD and CTBC 20 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC USD position performs unexpectedly, CTBC 20 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 20 will offset losses from the drop in CTBC 20's long position.

The idea behind CTBC USD Corporate and CTBC 20 Year 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.