Correlation Between CTBC Financial and X Legend

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

Diversification Opportunities for CTBC Financial and X Legend

0.73

Correlation Coefficient

CTBC Financial  X Legend

Poor diversification

The 3 months correlation between CTBC and 4994 is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and X Legend Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Legend Entertainment 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 X Legend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X Legend Entertainment has no effect on the direction of CTBC Financial i.e., CTBC Financial and X Legend go up and down completely randomly.

Pair Corralation between CTBC Financial and X Legend

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.17 times more return on investment than X Legend. However, CTBC Financial Holding is 6.03 times less risky than X Legend. It trades about -0.05 of its potential returns per unit of risk. X Legend Entertainment Co is currently generating about -0.05 per unit of risk. If you would invest  5,700  in CTBC Financial Holding on September 12, 2024 and sell it today you would lose (40.00) from holding CTBC Financial Holding or give up 0.7% of portfolio value over 90 days.

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

CTBC Financial Holding  vs.  X Legend Entertainment Co

CTBC Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

X Legend Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTBC Financial Holding and X Legend Entertainment 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.