Correlation Between De Licacy and CTBC Financial

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

By analyzing existing cross correlation between De Licacy Industrial and CTBC Financial Holding, you can compare the effects of market volatilities on De Licacy and CTBC Financial 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 De Licacy with a short position of CTBC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and CTBC Financial.

Diversification Opportunities for De Licacy and CTBC Financial

0.44

Correlation Coefficient

De Licacy  CTBC Financial

Very weak diversification

The 3 months correlation between 1464 and CTBC is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and CTBC Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Financial Holding and De Licacy 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 De Licacy Industrial are associated (or correlated) with CTBC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Financial Holding has no effect on the direction of De Licacy i.e., De Licacy and CTBC Financial go up and down completely randomly.

Pair Corralation between De Licacy and CTBC Financial

Assuming the 90 days trading horizon De Licacy is expected to generate 2.2 times less return on investment than CTBC Financial. In addition to that, De Licacy is 1.12 times more volatile than CTBC Financial Holding. It trades about 0.04 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.1 per unit of volatility. If you would invest  2,188  in CTBC Financial Holding on October 23, 2024 and sell it today you would earn a total of  1,682  from holding CTBC Financial Holding or generate 76.87% return on investment over 90 days.

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

De Licacy Industrial  vs.  CTBC Financial Holding

De Licacy Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

CTBC Financial Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with De Licacy and CTBC Financial

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

The idea behind De Licacy Industrial and CTBC Financial Holding 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.