Correlation Between CTBC Financial and Taiwan Mobile

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

Diversification Opportunities for CTBC Financial and Taiwan Mobile

-0.43

Correlation Coefficient

CTBC Financial  Taiwan Mobile

Very good diversification

The 3 months correlation between CTBC and Taiwan is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Taiwan Mobile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Mobile 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 Taiwan Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Mobile has no effect on the direction of CTBC Financial i.e., CTBC Financial and Taiwan Mobile go up and down completely randomly.

Pair Corralation between CTBC Financial and Taiwan Mobile

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.25 times more return on investment than Taiwan Mobile. However, CTBC Financial is 1.25 times more volatile than Taiwan Mobile Co. It trades about 0.29 of its potential returns per unit of risk. Taiwan Mobile Co is currently generating about 0.16 per unit of risk. If you would invest  3,680  in CTBC Financial Holding on September 16, 2024 and sell it today you would earn a total of  280.00  from holding CTBC Financial Holding or generate 7.61% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Taiwan Mobile Co

CTBC Financial Holding

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 20 (%) 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.

Taiwan Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Mobile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Mobile 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 Taiwan Mobile

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

The idea behind CTBC Financial Holding and Taiwan Mobile Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.