Correlation Between CTBC Financial and Lungyen Life

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

Diversification Opportunities for CTBC Financial and Lungyen Life

0.8

Correlation Coefficient

CTBC Financial  Lungyen Life

Very poor diversification

The 3 months correlation between CTBC and Lungyen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Lungyen Life Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lungyen Life Service 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 Lungyen Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lungyen Life Service has no effect on the direction of CTBC Financial i.e., CTBC Financial and Lungyen Life go up and down completely randomly.

Pair Corralation between CTBC Financial and Lungyen Life

Assuming the 90 days trading horizon CTBC Financial is expected to generate 7.49 times less return on investment than Lungyen Life. But when comparing it to its historical volatility, CTBC Financial Holding is 14.34 times less risky than Lungyen Life. It trades about 0.25 of its potential returns per unit of risk. Lungyen Life Service is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,780  in Lungyen Life Service on September 22, 2024 and sell it today you would earn a total of  650.00  from holding Lungyen Life Service or generate 13.6% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Lungyen Life Service

CTBC Financial Holding

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 19 (%) 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.

Lungyen Life Service

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lungyen Life Service are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lungyen Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC Financial and Lungyen Life

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

The idea behind CTBC Financial Holding and Lungyen Life Service 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.