Correlation Between Aker Technology and CTBC Financial

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

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

Diversification Opportunities for Aker Technology and CTBC Financial

0.29

Correlation Coefficient

Aker Technology  CTBC Financial

Modest diversification

The 3 months correlation between Aker and CTBC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aker Technology Co 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 Aker Technology 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 Aker Technology Co 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 Aker Technology i.e., Aker Technology and CTBC Financial go up and down completely randomly.

Pair Corralation between Aker Technology and CTBC Financial

Assuming the 90 days trading horizon Aker Technology Co is expected to under-perform the CTBC Financial. In addition to that, Aker Technology is 22.08 times more volatile than CTBC Financial Holding. It trades about -0.11 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.82 per unit of volatility. If you would invest  6,100  in CTBC Financial Holding on October 11, 2024 and sell it today you would earn a total of  170.00  from holding CTBC Financial Holding or generate 2.79% return on investment over 90 days.

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

Aker Technology Co  vs.  CTBC Financial Holding

Aker Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aker Technology Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aker Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

CTBC Financial Holding

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 31 (%) 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 Aker Technology and CTBC Financial

The main advantage of trading using opposite Aker Technology and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Technology 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 Aker Technology Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.