Correlation Between CTBC Financial and Hua Nan
Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Hua Nan 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 Hua Nan 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 Hua Nan Financial, you can compare the effects of market volatilities on CTBC Financial and Hua Nan 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 Hua Nan. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Hua Nan.
Diversification Opportunities for CTBC Financial and Hua Nan
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CTBC and Hua is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Hua Nan Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hua Nan Financial 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 Hua Nan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hua Nan Financial has no effect on the direction of CTBC Financial i.e., CTBC Financial and Hua Nan go up and down completely randomly.
Pair Corralation between CTBC Financial and Hua Nan
Assuming the 90 days trading horizon CTBC Financial is expected to generate 2.63 times less return on investment than Hua Nan. But when comparing it to its historical volatility, CTBC Financial Holding is 1.01 times less risky than Hua Nan. It trades about 0.06 of its potential returns per unit of risk. Hua Nan Financial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,655 in Hua Nan Financial on December 28, 2024 and sell it today you would earn a total of 180.00 from holding Hua Nan Financial or generate 6.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CTBC Financial Holding vs. Hua Nan Financial
Performance |
Timeline |
CTBC Financial Holding |
Hua Nan Financial |
CTBC Financial and Hua Nan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CTBC Financial and Hua Nan
The main advantage of trading using opposite CTBC Financial and Hua Nan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Hua Nan 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 Hua Nan will offset losses from the drop in Hua Nan's long position.CTBC Financial vs. Fubon Financial Holding | CTBC Financial vs. Cathay Financial Holding | CTBC Financial vs. Mega Financial Holding | CTBC Financial vs. First Financial Holding |
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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