Correlation Between CTBC 20 and CTBC TIP

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

Diversification Opportunities for CTBC 20 and CTBC TIP

-0.02

Correlation Coefficient

CTBC 20  CTBC TIP

Good diversification

The 3 months correlation between CTBC and CTBC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CTBC 20 Year and CTBC TIP Customized in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC TIP Customized 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 TIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC TIP Customized has no effect on the direction of CTBC 20 i.e., CTBC 20 and CTBC TIP go up and down completely randomly.

Pair Corralation between CTBC 20 and CTBC TIP

Assuming the 90 days trading horizon CTBC 20 Year is expected to generate 0.86 times more return on investment than CTBC TIP. However, CTBC 20 Year is 1.16 times less risky than CTBC TIP. It trades about 0.0 of its potential returns per unit of risk. CTBC TIP Customized is currently generating about -0.12 per unit of risk. If you would invest  3,310  in CTBC 20 Year on October 26, 2024 and sell it today you would earn a total of  2.00  from holding CTBC 20 Year or generate 0.06% return on investment over 90 days.

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

CTBC 20 Year  vs.  CTBC TIP Customized

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

CTBC TIP Customized

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC TIP Customized has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTBC TIP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CTBC 20 and CTBC TIP

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

The idea behind CTBC 20 Year and CTBC TIP Customized 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.