Correlation Between Ton Yi and CTBC Financial

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

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

Diversification Opportunities for Ton Yi and CTBC Financial

-0.87

Correlation Coefficient

Ton Yi  CTBC Financial

Pay attention - limited upside

The 3 months correlation between Ton and CTBC is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ton Yi Industrial 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 Ton Yi 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 Ton Yi Industrial 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 Ton Yi i.e., Ton Yi and CTBC Financial go up and down completely randomly.

Pair Corralation between Ton Yi and CTBC Financial

Assuming the 90 days trading horizon Ton Yi Industrial is expected to under-perform the CTBC Financial. In addition to that, Ton Yi is 1.29 times more volatile than CTBC Financial Holding. It trades about -0.27 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.0 per unit of volatility. If you would invest  3,905  in CTBC Financial Holding on October 8, 2024 and sell it today you would lose (5.00) from holding CTBC Financial Holding or give up 0.13% of portfolio value over 90 days.

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

Ton Yi Industrial  vs.  CTBC Financial Holding

Ton Yi Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ton Yi Industrial 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

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ton Yi and CTBC Financial

The main advantage of trading using opposite Ton Yi and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ton Yi 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 Ton Yi Industrial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.