Correlation Between CTBC Financial and Easywell Biomedicals

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

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

Diversification Opportunities for CTBC Financial and Easywell Biomedicals

0.4

Correlation Coefficient

CTBC Financial  Easywell Biomedicals

Very weak diversification

The 3 months correlation between CTBC and Easywell is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Easywell Biomedicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easywell Biomedicals and CTBC 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 CTBC Financial Holding are associated (or correlated) with Easywell Biomedicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easywell Biomedicals has no effect on the direction of CTBC Financial i.e., CTBC Financial and Easywell Biomedicals go up and down completely randomly.

Pair Corralation between CTBC Financial and Easywell Biomedicals

Assuming the 90 days trading horizon CTBC Financial is expected to generate 4.9 times less return on investment than Easywell Biomedicals. But when comparing it to its historical volatility, CTBC Financial Holding is 4.21 times less risky than Easywell Biomedicals. It trades about 0.06 of its potential returns per unit of risk. Easywell Biomedicals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,670  in Easywell Biomedicals on December 28, 2024 and sell it today you would earn a total of  690.00  from holding Easywell Biomedicals or generate 10.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

CTBC Financial Holding  vs.  Easywell Biomedicals

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.

Easywell Biomedicals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Easywell Biomedicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Easywell Biomedicals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC Financial and Easywell Biomedicals

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

The idea behind CTBC Financial Holding and Easywell Biomedicals 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.