Correlation Between Davicom Semiconductor and CTBC Financial

Can any of the company-specific risk be diversified away by investing in both Davicom Semiconductor and CTBC Financial 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 Davicom Semiconductor and CTBC Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Davicom Semiconductor and CTBC Financial Holding, you can compare the effects of market volatilities on Davicom Semiconductor and CTBC Financial 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 Davicom Semiconductor with a short position of CTBC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davicom Semiconductor and CTBC Financial.

Diversification Opportunities for Davicom Semiconductor and CTBC Financial

-0.75

Correlation Coefficient

Davicom Semiconductor  CTBC Financial

Pay attention - limited upside

The 3 months correlation between Davicom and CTBC is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Davicom Semiconductor and CTBC Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Financial Holding and Davicom Semiconductor 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 Davicom Semiconductor are associated (or correlated) with CTBC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Financial Holding has no effect on the direction of Davicom Semiconductor i.e., Davicom Semiconductor and CTBC Financial go up and down completely randomly.

Pair Corralation between Davicom Semiconductor and CTBC Financial

Assuming the 90 days trading horizon Davicom Semiconductor is expected to under-perform the CTBC Financial. In addition to that, Davicom Semiconductor is 13.22 times more volatile than CTBC Financial Holding. It trades about -0.18 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.41 per unit of volatility. If you would invest  6,220  in CTBC Financial Holding on October 27, 2024 and sell it today you would earn a total of  60.00  from holding CTBC Financial Holding or generate 0.96% return on investment over 90 days.

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

Davicom Semiconductor  vs.  CTBC Financial Holding

Davicom Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davicom Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

CTBC Financial Holding

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 29 (%) 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.

Pair Trading with Davicom Semiconductor and CTBC Financial

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

The idea behind Davicom Semiconductor and CTBC Financial Holding 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.