Correlation Between CTBC Financial and Chumpower Machinery

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

Diversification Opportunities for CTBC Financial and Chumpower Machinery

-0.57

Correlation Coefficient

CTBC Financial  Chumpower Machinery

Excellent diversification

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

Pair Corralation between CTBC Financial and Chumpower Machinery

Assuming the 90 days trading horizon CTBC Financial is expected to generate 4.09 times less return on investment than Chumpower Machinery. But when comparing it to its historical volatility, CTBC Financial Holding is 1.42 times less risky than Chumpower Machinery. It trades about 0.05 of its potential returns per unit of risk. Chumpower Machinery Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,185  in Chumpower Machinery Corp on October 9, 2024 and sell it today you would earn a total of  85.00  from holding Chumpower Machinery Corp or generate 3.89% 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.  Chumpower Machinery Corp

CTBC Financial Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 14 (%) 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.

Chumpower Machinery Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTBC Financial Holding and Chumpower Machinery Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.