Correlation Between CTBC Financial and Topkey Corp

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

Diversification Opportunities for CTBC Financial and Topkey Corp

-0.62

Correlation Coefficient

CTBC Financial  Topkey Corp

Excellent diversification

The 3 months correlation between CTBC and Topkey is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Topkey Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topkey 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 Topkey Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topkey Corp has no effect on the direction of CTBC Financial i.e., CTBC Financial and Topkey Corp go up and down completely randomly.

Pair Corralation between CTBC Financial and Topkey Corp

Assuming the 90 days trading horizon CTBC Financial is expected to generate 5.37 times less return on investment than Topkey Corp. But when comparing it to its historical volatility, CTBC Financial Holding is 9.0 times less risky than Topkey Corp. It trades about 0.21 of its potential returns per unit of risk. Topkey Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,000  in Topkey Corp on September 19, 2024 and sell it today you would earn a total of  650.00  from holding Topkey Corp or generate 3.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CTBC Financial Holding  vs.  Topkey Corp

CTBC Financial Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 16 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Topkey Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topkey Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CTBC Financial and Topkey Corp

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

The idea behind CTBC Financial Holding and Topkey 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.