Correlation Between CTBC Financial and Icares Medicus

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

Diversification Opportunities for CTBC Financial and Icares Medicus

0.33

Correlation Coefficient

CTBC Financial  Icares Medicus

Weak diversification

The 3 months correlation between CTBC and Icares is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Icares Medicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icares Medicus 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 Icares Medicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icares Medicus has no effect on the direction of CTBC Financial i.e., CTBC Financial and Icares Medicus go up and down completely randomly.

Pair Corralation between CTBC Financial and Icares Medicus

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.08 times more return on investment than Icares Medicus. However, CTBC Financial Holding is 11.81 times less risky than Icares Medicus. It trades about 0.01 of its potential returns per unit of risk. Icares Medicus is currently generating about -0.08 per unit of risk. If you would invest  5,668  in CTBC Financial Holding on September 25, 2024 and sell it today you would earn a total of  12.00  from holding CTBC Financial Holding or generate 0.21% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Icares Medicus

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

Icares Medicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Icares Medicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CTBC Financial and Icares Medicus

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

The idea behind CTBC Financial Holding and Icares Medicus 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.