Correlation Between CTBC Financial and President Chain

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

Diversification Opportunities for CTBC Financial and President Chain

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between CTBC and President is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store 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 President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of CTBC Financial i.e., CTBC Financial and President Chain go up and down completely randomly.

Pair Corralation between CTBC Financial and President Chain

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.67 times more return on investment than President Chain. However, CTBC Financial is 1.67 times more volatile than President Chain Store. It trades about 0.26 of its potential returns per unit of risk. President Chain Store is currently generating about -0.03 per unit of risk. If you would invest  3,685  in CTBC Financial Holding on September 20, 2024 and sell it today you would earn a total of  255.00  from holding CTBC Financial Holding or generate 6.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

CTBC Financial Holding  vs.  President Chain Store

 Performance 
       Timeline  
CTBC Financial Holding 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial showed solid returns over the last few months and may actually be approaching a breakup point.
President Chain Store 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days President Chain Store 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 and President Chain Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CTBC Financial and President Chain

The main advantage of trading using opposite CTBC Financial and President Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, President Chain 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 President Chain will offset losses from the drop in President Chain's long position.
The idea behind CTBC Financial Holding and President Chain Store 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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