Correlation Between YuantaP Shares and CTBC Financial

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

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

Diversification Opportunities for YuantaP Shares and CTBC Financial

-0.66

Correlation Coefficient

YuantaP Shares  CTBC Financial

Excellent diversification

The 3 months correlation between YuantaP and CTBC is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding YuantaP shares Taiwan Mid Cap 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 YuantaP Shares 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 YuantaP shares Taiwan Mid Cap 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 YuantaP Shares i.e., YuantaP Shares and CTBC Financial go up and down completely randomly.

Pair Corralation between YuantaP Shares and CTBC Financial

Assuming the 90 days trading horizon YuantaP shares Taiwan Mid Cap is expected to generate 3.28 times more return on investment than CTBC Financial. However, YuantaP Shares is 3.28 times more volatile than CTBC Financial Holding. It trades about 0.45 of its potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.09 per unit of risk. If you would invest  7,520  in YuantaP shares Taiwan Mid Cap on February 21, 2024 and sell it today you would earn a total of  475.00  from holding YuantaP shares Taiwan Mid Cap or generate 6.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

YuantaP shares Taiwan Mid Cap  vs.  CTBC Financial Holding

YuantaP shares Taiwan

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YuantaP shares Taiwan Mid Cap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, YuantaP Shares 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

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 fundamental 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 YuantaP Shares and CTBC Financial

The main advantage of trading using opposite YuantaP Shares and CTBC Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YuantaP Shares 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 YuantaP shares Taiwan Mid Cap 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.