Correlation Between EnTie Commercial and CTBC Financial

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

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

Diversification Opportunities for EnTie Commercial and CTBC Financial

-0.38

Correlation Coefficient

EnTie Commercial  CTBC Financial

Very good diversification

The 3 months correlation between EnTie and CTBC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding EnTie Commercial Bank 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 EnTie Commercial 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 EnTie Commercial Bank 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 EnTie Commercial i.e., EnTie Commercial and CTBC Financial go up and down completely randomly.

Pair Corralation between EnTie Commercial and CTBC Financial

Assuming the 90 days trading horizon EnTie Commercial Bank is expected to under-perform the CTBC Financial. In addition to that, EnTie Commercial is 1.34 times more volatile than CTBC Financial Holding. It trades about -0.26 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about -0.04 per unit of volatility. If you would invest  3,900  in CTBC Financial Holding on October 4, 2024 and sell it today you would lose (30.00) from holding CTBC Financial Holding or give up 0.77% of portfolio value over 90 days.

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

EnTie Commercial Bank  vs.  CTBC Financial Holding

EnTie Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnTie Commercial Bank 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.

CTBC Financial Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CTBC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with EnTie Commercial and CTBC Financial

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