Correlation Between CTBC Financial and Da Li

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

Diversification Opportunities for CTBC Financial and Da Li

-0.54

Correlation Coefficient

CTBC Financial  Da Li

Excellent diversification

The 3 months correlation between CTBC and 6177 is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Da Li Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Li Development 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 Da Li. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Li Development has no effect on the direction of CTBC Financial i.e., CTBC Financial and Da Li go up and down completely randomly.

Pair Corralation between CTBC Financial and Da Li

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.51 times more return on investment than Da Li. However, CTBC Financial Holding is 1.97 times less risky than Da Li. It trades about 0.21 of its potential returns per unit of risk. Da Li Development Co is currently generating about -0.07 per unit of risk. If you would invest  3,440  in CTBC Financial Holding on September 29, 2024 and sell it today you would earn a total of  505.00  from holding CTBC Financial Holding or generate 14.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

CTBC Financial Holding  vs.  Da Li Development Co

CTBC Financial Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 16 (%) 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.

Da Li Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Da Li Development Co 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.

Pair Trading with CTBC Financial and Da Li

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

The idea behind CTBC Financial Holding and Da Li Development Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.