Correlation Between CTBC Financial and Ma Kuang

Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Ma Kuang 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 Ma Kuang 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 Ma Kuang Healthcare, you can compare the effects of market volatilities on CTBC Financial and Ma Kuang 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 Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Ma Kuang.

Diversification Opportunities for CTBC Financial and Ma Kuang

-0.49

Correlation Coefficient

CTBC Financial  Ma Kuang

Very good diversification

The 3 months correlation between CTBC and 4139 is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare 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 Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of CTBC Financial i.e., CTBC Financial and Ma Kuang go up and down completely randomly.

Pair Corralation between CTBC Financial and Ma Kuang

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.47 times more return on investment than Ma Kuang. However, CTBC Financial Holding is 2.12 times less risky than Ma Kuang. It trades about 0.26 of its potential returns per unit of risk. Ma Kuang Healthcare is currently generating about -0.01 per unit of risk. If you would invest  3,255  in CTBC Financial Holding on September 13, 2024 and sell it today you would earn a total of  655.00  from holding CTBC Financial Holding or generate 20.12% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Ma Kuang Healthcare

CTBC Financial Holding

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ma Kuang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with CTBC Financial and Ma Kuang

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

The idea behind CTBC Financial Holding and Ma Kuang Healthcare 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.