Correlation Between CTBC Financial and CKM Building

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

Diversification Opportunities for CTBC Financial and CKM Building

-0.42

Correlation Coefficient

CTBC Financial  CKM Building

Very good diversification

The 3 months correlation between CTBC and CKM is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and CKM Building Material in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CKM Building Material 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 CKM Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CKM Building Material has no effect on the direction of CTBC Financial i.e., CTBC Financial and CKM Building go up and down completely randomly.

Pair Corralation between CTBC Financial and CKM Building

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.14 times more return on investment than CKM Building. However, CTBC Financial is 1.14 times more volatile than CKM Building Material. It trades about 0.05 of its potential returns per unit of risk. CKM Building Material is currently generating about -0.01 per unit of risk. If you would invest  3,905  in CTBC Financial Holding on October 9, 2024 and sell it today you would earn a total of  35.00  from holding CTBC Financial Holding or generate 0.9% 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.  CKM Building Material

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.

CKM Building Material

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTBC Financial Holding and CKM Building Material 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.