Correlation Between CTBC Financial and Ardentec

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

Diversification Opportunities for CTBC Financial and Ardentec

-0.84

Correlation Coefficient

CTBC Financial  Ardentec

Pay attention - limited upside

The 3 months correlation between CTBC and Ardentec is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Ardentec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardentec 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 Ardentec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardentec has no effect on the direction of CTBC Financial i.e., CTBC Financial and Ardentec go up and down completely randomly.

Pair Corralation between CTBC Financial and Ardentec

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.5 times more return on investment than Ardentec. However, CTBC Financial Holding is 2.0 times less risky than Ardentec. It trades about 0.14 of its potential returns per unit of risk. Ardentec is currently generating about -0.08 per unit of risk. If you would invest  3,615  in CTBC Financial Holding on September 23, 2024 and sell it today you would earn a total of  235.00  from holding CTBC Financial Holding or generate 6.5% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Ardentec

CTBC Financial Holding

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 10 (%) 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 January 2025.

Ardentec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardentec 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.

Pair Trading with CTBC Financial and Ardentec

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

The idea behind CTBC Financial Holding and Ardentec 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 Global Correlations module to find global opportunities by holding instruments from different markets.