Correlation Between CTBC Financial and KS Terminals

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

Diversification Opportunities for CTBC Financial and KS Terminals

0.02

Correlation Coefficient

CTBC Financial  KS Terminals

Significant diversification

The 3 months correlation between CTBC and 3003 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and KS Terminals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KS Terminals 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 KS Terminals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KS Terminals has no effect on the direction of CTBC Financial i.e., CTBC Financial and KS Terminals go up and down completely randomly.

Pair Corralation between CTBC Financial and KS Terminals

Assuming the 90 days trading horizon CTBC Financial is expected to generate 2.65 times less return on investment than KS Terminals. But when comparing it to its historical volatility, CTBC Financial Holding is 6.16 times less risky than KS Terminals. It trades about 0.04 of its potential returns per unit of risk. KS Terminals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,000  in KS Terminals on October 13, 2024 and sell it today you would earn a total of  530.00  from holding KS Terminals or generate 7.57% return on investment over 90 days.

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

CTBC Financial Holding  vs.  KS Terminals

CTBC Financial Holding

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CTBC Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KS Terminals

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTBC Financial Holding and KS Terminals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.