Correlation Between Yuanta Financial and EnTie Commercial

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

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

Diversification Opportunities for Yuanta Financial and EnTie Commercial

0.39

Correlation Coefficient

Yuanta Financial  EnTie Commercial

Weak diversification

The 3 months correlation between Yuanta and EnTie is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Financial Holdings and EnTie Commercial Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnTie Commercial Bank and Yuanta Financial 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 Yuanta Financial Holdings are associated (or correlated) with EnTie Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnTie Commercial Bank has no effect on the direction of Yuanta Financial i.e., Yuanta Financial and EnTie Commercial go up and down completely randomly.

Pair Corralation between Yuanta Financial and EnTie Commercial

Assuming the 90 days trading horizon Yuanta Financial Holdings is expected to generate 0.87 times more return on investment than EnTie Commercial. However, Yuanta Financial Holdings is 1.14 times less risky than EnTie Commercial. It trades about 0.18 of its potential returns per unit of risk. EnTie Commercial Bank is currently generating about 0.07 per unit of risk. If you would invest  3,050  in Yuanta Financial Holdings on September 5, 2024 and sell it today you would earn a total of  430.00  from holding Yuanta Financial Holdings or generate 14.1% return on investment over 90 days.

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

Yuanta Financial Holdings  vs.  EnTie Commercial Bank

Yuanta Financial Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Financial Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Yuanta Financial showed solid returns over the last few months and may actually be approaching a breakup point.

EnTie Commercial Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EnTie Commercial Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EnTie Commercial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Yuanta Financial and EnTie Commercial

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

The idea behind Yuanta Financial Holdings and EnTie Commercial Bank 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.