Correlation Between CTBC Financial and Averlogic Technologies

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

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

Diversification Opportunities for CTBC Financial and Averlogic Technologies

-0.74

Correlation Coefficient

CTBC Financial  Averlogic Technologies

Pay attention - limited upside

The 3 months correlation between CTBC and Averlogic is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Averlogic Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Averlogic Technologies and CTBC Financial 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 CTBC Financial Holding are associated (or correlated) with Averlogic Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Averlogic Technologies has no effect on the direction of CTBC Financial i.e., CTBC Financial and Averlogic Technologies go up and down completely randomly.

Pair Corralation between CTBC Financial and Averlogic Technologies

Assuming the 90 days trading horizon CTBC Financial is expected to generate 32.46 times less return on investment than Averlogic Technologies. But when comparing it to its historical volatility, CTBC Financial Holding is 15.07 times less risky than Averlogic Technologies. It trades about 0.06 of its potential returns per unit of risk. Averlogic Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,190  in Averlogic Technologies on February 7, 2024 and sell it today you would earn a total of  3,170  from holding Averlogic Technologies or generate 99.37% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Averlogic Technologies

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.

Averlogic Technologies

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Averlogic Technologies are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Averlogic Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC Financial and Averlogic Technologies

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

The idea behind CTBC Financial Holding and Averlogic Technologies 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.