Correlation Between International Games and CTBC Financial

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

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

Diversification Opportunities for International Games and CTBC Financial

0.6

Correlation Coefficient

International Games  CTBC Financial

Poor diversification

The 3 months correlation between International and CTBC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding International Games System 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 International Games 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 International Games System 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 International Games i.e., International Games and CTBC Financial go up and down completely randomly.

Pair Corralation between International Games and CTBC Financial

Assuming the 90 days trading horizon International Games System is expected to generate 24.24 times more return on investment than CTBC Financial. However, International Games is 24.24 times more volatile than CTBC Financial Holding. It trades about 0.15 of its potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.17 per unit of risk. If you would invest  79,100  in International Games System on September 12, 2024 and sell it today you would earn a total of  20,500  from holding International Games System or generate 25.92% return on investment over 90 days.

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

International Games System  vs.  CTBC Financial Holding

International Games

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Games System are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, International Games showed solid returns over the last few months and may actually be approaching a breakup point.

CTBC Financial Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 13 (%) 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 International Games and CTBC Financial

The main advantage of trading using opposite International Games and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Games 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 International Games System 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.