Correlation Between CTBC Financial and Good Finance

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

Diversification Opportunities for CTBC Financial and Good Finance

-0.32

Correlation Coefficient

CTBC Financial  Good Finance

Very good diversification

The 3 months correlation between CTBC and Good is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Good Finance Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Good Finance Securities 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 Good Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Good Finance Securities has no effect on the direction of CTBC Financial i.e., CTBC Financial and Good Finance go up and down completely randomly.

Pair Corralation between CTBC Financial and Good Finance

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.19 times more return on investment than Good Finance. However, CTBC Financial Holding is 5.38 times less risky than Good Finance. It trades about 0.17 of its potential returns per unit of risk. Good Finance Securities is currently generating about -0.18 per unit of risk. If you would invest  6,080  in CTBC Financial Holding on September 18, 2024 and sell it today you would earn a total of  30.00  from holding CTBC Financial Holding or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CTBC Financial Holding  vs.  Good Finance Securities

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.

Good Finance Securities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Good Finance Securities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Good Finance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CTBC Financial and Good Finance

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

The idea behind CTBC Financial Holding and Good Finance Securities 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.