Correlation Between Highwealth Construction and CTBC Financial

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

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

Diversification Opportunities for Highwealth Construction and CTBC Financial

0.62

Correlation Coefficient

Highwealth Construction  CTBC Financial

Poor diversification

The 3 months correlation between Highwealth and CTBC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Highwealth Construction 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 Highwealth Construction 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 Highwealth Construction 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 Highwealth Construction i.e., Highwealth Construction and CTBC Financial go up and down completely randomly.

Pair Corralation between Highwealth Construction and CTBC Financial

Assuming the 90 days trading horizon Highwealth Construction Corp is expected to generate 1.53 times more return on investment than CTBC Financial. However, Highwealth Construction is 1.53 times more volatile than CTBC Financial Holding. It trades about 0.05 of its potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.06 per unit of risk. If you would invest  4,370  in Highwealth Construction Corp on December 29, 2024 and sell it today you would earn a total of  130.00  from holding Highwealth Construction Corp or generate 2.97% return on investment over 90 days.

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

Highwealth Construction Corp  vs.  CTBC Financial Holding

Highwealth Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highwealth Construction Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Highwealth Construction is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CTBC Financial Holding

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CTBC Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Highwealth Construction and CTBC Financial

The main advantage of trading using opposite Highwealth Construction and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highwealth Construction 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 Highwealth Construction 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 Transaction History module to view history of all your transactions and understand their impact on performance.