Correlation Between Realtek Semiconductor and CTBC Financial

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

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

Diversification Opportunities for Realtek Semiconductor and CTBC Financial

0.79

Correlation Coefficient

Realtek Semiconductor  CTBC Financial

Poor diversification

The 3 months correlation between Realtek and CTBC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Realtek Semiconductor Corp 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 Realtek Semiconductor 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 Realtek Semiconductor Corp 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 Realtek Semiconductor i.e., Realtek Semiconductor and CTBC Financial go up and down completely randomly.

Pair Corralation between Realtek Semiconductor and CTBC Financial

Assuming the 90 days trading horizon Realtek Semiconductor Corp is expected to generate 12.64 times more return on investment than CTBC Financial. However, Realtek Semiconductor is 12.64 times more volatile than CTBC Financial Holding. It trades about 0.16 of its potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.33 per unit of risk. If you would invest  50,000  in Realtek Semiconductor Corp on September 22, 2024 and sell it today you would earn a total of  2,900  from holding Realtek Semiconductor Corp or generate 5.8% return on investment over 90 days.

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

Realtek Semiconductor Corp  vs.  CTBC Financial Holding

Realtek Semiconductor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CTBC Financial Holding

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CTBC Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Realtek Semiconductor and CTBC Financial

The main advantage of trading using opposite Realtek Semiconductor and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realtek Semiconductor 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 Realtek Semiconductor Corp 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.