Correlation Between CTBC Financial and Xintec

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

Diversification Opportunities for CTBC Financial and Xintec

-0.57

Correlation Coefficient

CTBC Financial  Xintec

Excellent diversification

The 3 months correlation between CTBC and Xintec is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Xintec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xintec 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 Xintec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xintec has no effect on the direction of CTBC Financial i.e., CTBC Financial and Xintec go up and down completely randomly.

Pair Corralation between CTBC Financial and Xintec

Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.49 times less return on investment than Xintec. But when comparing it to its historical volatility, CTBC Financial Holding is 2.08 times less risky than Xintec. It trades about 0.1 of its potential returns per unit of risk. Xintec is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,446  in Xintec on September 22, 2024 and sell it today you would earn a total of  10,954  from holding Xintec or generate 115.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

CTBC Financial Holding  vs.  Xintec

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.

Xintec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xintec 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 Xintec

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

The idea behind CTBC Financial Holding and Xintec 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.