Correlation Between CTBC Financial and Shin Kong

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

Diversification Opportunities for CTBC Financial and Shin Kong

0.91

Correlation Coefficient

CTBC Financial  Shin Kong

Almost no diversification

The 3 months correlation between CTBC and Shin is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Shin Kong Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Kong Financial 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 Shin Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Kong Financial has no effect on the direction of CTBC Financial i.e., CTBC Financial and Shin Kong go up and down completely randomly.

Pair Corralation between CTBC Financial and Shin Kong

Assuming the 90 days trading horizon CTBC Financial is expected to generate 12.07 times less return on investment than Shin Kong. But when comparing it to its historical volatility, CTBC Financial Holding is 1.23 times less risky than Shin Kong. It trades about 0.04 of its potential returns per unit of risk. Shin Kong Financial is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  3,740  in Shin Kong Financial on December 2, 2024 and sell it today you would earn a total of  80.00  from holding Shin Kong Financial or generate 2.14% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Shin Kong Financial

CTBC Financial Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 20 (%) 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.

Shin Kong Financial

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Kong Financial are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Shin Kong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CTBC Financial and Shin Kong

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

The idea behind CTBC Financial Holding and Shin Kong Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.