Correlation Between CTBC Financial and Cipherlab

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

Diversification Opportunities for CTBC Financial and Cipherlab

-0.69

Correlation Coefficient

CTBC Financial  Cipherlab

Excellent diversification

The 3 months correlation between CTBC and Cipherlab is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Cipherlab Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cipherlab 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 Cipherlab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cipherlab has no effect on the direction of CTBC Financial i.e., CTBC Financial and Cipherlab go up and down completely randomly.

Pair Corralation between CTBC Financial and Cipherlab

Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.04 times less return on investment than Cipherlab. But when comparing it to its historical volatility, CTBC Financial Holding is 2.31 times less risky than Cipherlab. It trades about 0.1 of its potential returns per unit of risk. Cipherlab Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,645  in Cipherlab Co on October 4, 2024 and sell it today you would earn a total of  875.00  from holding Cipherlab Co or generate 53.19% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Cipherlab Co

CTBC Financial Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 15 (%) 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.

Cipherlab

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cipherlab Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Cipherlab 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 Cipherlab

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

The idea behind CTBC Financial Holding and Cipherlab 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.