Correlation Between CTBC Enhanced and CTBC USD

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

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

Diversification Opportunities for CTBC Enhanced and CTBC USD

0.88

Correlation Coefficient

CTBC Enhanced  CTBC USD

Very poor diversification

The 3 months correlation between CTBC and CTBC is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Enhanced Yield and CTBC USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC USD Corporate and CTBC Enhanced 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 Enhanced Yield are associated (or correlated) with CTBC USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC USD Corporate has no effect on the direction of CTBC Enhanced i.e., CTBC Enhanced and CTBC USD go up and down completely randomly.

Pair Corralation between CTBC Enhanced and CTBC USD

Assuming the 90 days trading horizon CTBC Enhanced Yield is expected to under-perform the CTBC USD. In addition to that, CTBC Enhanced is 1.01 times more volatile than CTBC USD Corporate. It trades about -0.39 of its total potential returns per unit of risk. CTBC USD Corporate is currently generating about -0.37 per unit of volatility. 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	Strong
Accuracy	100.0%
Values	Daily Returns

CTBC Enhanced Yield  vs.  CTBC USD Corporate

CTBC Enhanced Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC Enhanced Yield has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CTBC Enhanced is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with CTBC Enhanced and CTBC USD

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

The idea behind CTBC Enhanced Yield and CTBC USD Corporate 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.