Correlation Between CTBC 20 and CTBC Emerging

Can any of the company-specific risk be diversified away by investing in both CTBC 20 and CTBC Emerging 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 20 and CTBC Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CTBC 20 Year and CTBC Emerging Asia, you can compare the effects of market volatilities on CTBC 20 and CTBC Emerging 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 20 with a short position of CTBC Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC 20 and CTBC Emerging.

Diversification Opportunities for CTBC 20 and CTBC Emerging

0.82

Correlation Coefficient

CTBC 20  CTBC Emerging

Very poor diversification

The 3 months correlation between CTBC and CTBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CTBC 20 Year and CTBC Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Emerging Asia and CTBC 20 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 20 Year are associated (or correlated) with CTBC Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Emerging Asia has no effect on the direction of CTBC 20 i.e., CTBC 20 and CTBC Emerging go up and down completely randomly.

Pair Corralation between CTBC 20 and CTBC Emerging

Assuming the 90 days trading horizon CTBC 20 is expected to generate 1.1 times less return on investment than CTBC Emerging. In addition to that, CTBC 20 is 1.31 times more volatile than CTBC Emerging Asia. It trades about 0.06 of its total potential returns per unit of risk. CTBC Emerging Asia is currently generating about 0.08 per unit of volatility. If you would invest  3,531  in CTBC Emerging Asia on December 23, 2024 and sell it today you would earn a total of  74.00  from holding CTBC Emerging Asia or generate 2.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

CTBC 20 Year  vs.  CTBC Emerging Asia

CTBC 20 Year

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC 20 Year are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

CTBC Emerging Asia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Emerging Asia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC Emerging 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 20 and CTBC Emerging

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

The idea behind CTBC 20 Year and CTBC Emerging Asia 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.