Correlation Between CTBC Financial and Nak Sealing

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

Diversification Opportunities for CTBC Financial and Nak Sealing

-0.47

Correlation Coefficient

CTBC Financial  Nak Sealing

Very good diversification

The 3 months correlation between CTBC and Nak is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Nak Sealing Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nak Sealing Technologies 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 Nak Sealing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nak Sealing Technologies has no effect on the direction of CTBC Financial i.e., CTBC Financial and Nak Sealing go up and down completely randomly.

Pair Corralation between CTBC Financial and Nak Sealing

Assuming the 90 days trading horizon CTBC Financial is expected to generate 3.29 times less return on investment than Nak Sealing. But when comparing it to its historical volatility, CTBC Financial Holding is 5.05 times less risky than Nak Sealing. It trades about 0.04 of its potential returns per unit of risk. Nak Sealing Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  10,056  in Nak Sealing Technologies on October 8, 2024 and sell it today you would earn a total of  1,344  from holding Nak Sealing Technologies or generate 13.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

CTBC Financial Holding  vs.  Nak Sealing Technologies

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Nak Sealing Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTBC Financial Holding and Nak Sealing Technologies 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.