Correlation Between CTBC 15 and CTBC TIP

Can any of the company-specific risk be diversified away by investing in both CTBC 15 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 15 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 15 Developed and CTBC TIP Customized, you can compare the effects of market volatilities on CTBC 15 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 15 with a short position of CTBC TIP. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC 15 and CTBC TIP.

Diversification Opportunities for CTBC 15 and CTBC TIP

0.25

Correlation Coefficient

CTBC 15  CTBC TIP

Modest diversification

The 3 months correlation between CTBC and CTBC is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CTBC 15 Developed 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 15 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 15 Developed 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 15 i.e., CTBC 15 and CTBC TIP go up and down completely randomly.

Pair Corralation between CTBC 15 and CTBC TIP

Assuming the 90 days trading horizon CTBC 15 is expected to generate 1.42 times less return on investment than CTBC TIP. But when comparing it to its historical volatility, CTBC 15 Developed is 1.26 times less risky than CTBC TIP. It trades about 0.04 of its potential returns per unit of risk. CTBC TIP Customized is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,816  in CTBC TIP Customized on December 21, 2024 and sell it today you would earn a total of  37.00  from holding CTBC TIP Customized or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.43%
Values	Daily Returns

CTBC 15 Developed  vs.  CTBC TIP Customized

CTBC 15 Developed

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC 15 Developed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC 15 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CTBC TIP Customized

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC TIP Customized are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 15 and CTBC TIP

The main advantage of trading using opposite CTBC 15 and CTBC TIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC 15 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 15 Developed 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.