Correlation Between CTBC Financial and Kindom Construction

Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Kindom Construction 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 Kindom Construction 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 Kindom Construction Corp, you can compare the effects of market volatilities on CTBC Financial and Kindom Construction 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 Kindom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Kindom Construction.

Diversification Opportunities for CTBC Financial and Kindom Construction

0.63

Correlation Coefficient

CTBC Financial  Kindom Construction

Poor diversification

The 3 months correlation between CTBC and Kindom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Kindom Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindom Construction Corp 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 Kindom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindom Construction Corp has no effect on the direction of CTBC Financial i.e., CTBC Financial and Kindom Construction go up and down completely randomly.

Pair Corralation between CTBC Financial and Kindom Construction

Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.21 times less return on investment than Kindom Construction. But when comparing it to its historical volatility, CTBC Financial Holding is 1.6 times less risky than Kindom Construction. It trades about 0.1 of its potential returns per unit of risk. Kindom Construction Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,697  in Kindom Construction Corp on October 7, 2024 and sell it today you would earn a total of  2,333  from holding Kindom Construction Corp or generate 86.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

CTBC Financial Holding  vs.  Kindom Construction Corp

CTBC Financial Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kindom Construction Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kindom Construction Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kindom Construction 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 CTBC Financial and Kindom Construction

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

The idea behind CTBC Financial Holding and Kindom Construction Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.