Correlation Between CTBC Financial and ALFORMER Industrial

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

Diversification Opportunities for CTBC Financial and ALFORMER Industrial

-0.68

Correlation Coefficient

CTBC Financial  ALFORMER Industrial

Excellent diversification

The 3 months correlation between CTBC and ALFORMER is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and ALFORMER Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALFORMER Industrial 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 ALFORMER Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALFORMER Industrial has no effect on the direction of CTBC Financial i.e., CTBC Financial and ALFORMER Industrial go up and down completely randomly.

Pair Corralation between CTBC Financial and ALFORMER Industrial

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.11 times more return on investment than ALFORMER Industrial. However, CTBC Financial Holding is 8.77 times less risky than ALFORMER Industrial. It trades about 0.32 of its potential returns per unit of risk. ALFORMER Industrial Co is currently generating about -0.1 per unit of risk. If you would invest  5,660  in CTBC Financial Holding on October 11, 2024 and sell it today you would earn a total of  120.00  from holding CTBC Financial Holding or generate 2.12% 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.  ALFORMER Industrial Co

CTBC Financial Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 9 (%) 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.

ALFORMER Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ALFORMER Industrial Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ALFORMER Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC Financial and ALFORMER Industrial

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

The idea behind CTBC Financial Holding and ALFORMER Industrial Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.