Correlation Between CTBC USD and Yuanta Daily

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

By analyzing existing cross correlation between CTBC USD Corporate and Yuanta Daily CSI, you can compare the effects of market volatilities on CTBC USD and Yuanta Daily 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 USD with a short position of Yuanta Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC USD and Yuanta Daily.

Diversification Opportunities for CTBC USD and Yuanta Daily

-0.44

Correlation Coefficient

CTBC USD  Yuanta Daily

Very good diversification

The 3 months correlation between CTBC and Yuanta is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CTBC USD Corporate and Yuanta Daily CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Daily CSI and CTBC USD 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 USD Corporate are associated (or correlated) with Yuanta Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Daily CSI has no effect on the direction of CTBC USD i.e., CTBC USD and Yuanta Daily go up and down completely randomly.

Pair Corralation between CTBC USD and Yuanta Daily

Assuming the 90 days trading horizon CTBC USD is expected to generate 47.25 times less return on investment than Yuanta Daily. But when comparing it to its historical volatility, CTBC USD Corporate is 8.89 times less risky than Yuanta Daily. It trades about 0.02 of its potential returns per unit of risk. Yuanta Daily CSI is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,246  in Yuanta Daily CSI on September 2, 2024 and sell it today you would earn a total of  350.00  from holding Yuanta Daily CSI or generate 28.09% return on investment over 90 days.

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

CTBC USD Corporate  vs.  Yuanta Daily CSI

CTBC USD Corporate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC USD Corporate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CTBC USD is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yuanta Daily CSI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily CSI are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Yuanta Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC USD and Yuanta Daily

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

The idea behind CTBC USD Corporate and Yuanta Daily CSI 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.