Correlation Between CSBC Corp and Aerospace Industrial

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

By analyzing existing cross correlation between CSBC Corp Taiwan and Aerospace Industrial Development, you can compare the effects of market volatilities on CSBC Corp and Aerospace Industrial 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 CSBC Corp with a short position of Aerospace Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSBC Corp and Aerospace Industrial.

Diversification Opportunities for CSBC Corp and Aerospace Industrial

0.74

Correlation Coefficient

CSBC Corp  Aerospace Industrial

Poor diversification

The 3 months correlation between CSBC and Aerospace is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CSBC Corp Taiwan and Aerospace Industrial Developme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Industrial and CSBC Corp 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 CSBC Corp Taiwan are associated (or correlated) with Aerospace Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Industrial has no effect on the direction of CSBC Corp i.e., CSBC Corp and Aerospace Industrial go up and down completely randomly.

Pair Corralation between CSBC Corp and Aerospace Industrial

Assuming the 90 days trading horizon CSBC Corp Taiwan is expected to under-perform the Aerospace Industrial. But the stock apears to be less risky and, when comparing its historical volatility, CSBC Corp Taiwan is 1.12 times less risky than Aerospace Industrial. The stock trades about -0.26 of its potential returns per unit of risk. The Aerospace Industrial Development is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,350  in Aerospace Industrial Development on September 15, 2024 and sell it today you would lose (90.00) from holding Aerospace Industrial Development or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

CSBC Corp Taiwan  vs.  Aerospace Industrial Developme

CSBC Corp Taiwan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSBC Corp Taiwan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Industrial Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with CSBC Corp and Aerospace Industrial

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

The idea behind CSBC Corp Taiwan and Aerospace Industrial Development 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..