Correlation Between CTBC Financial and Vietnam Manufacturing

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

Diversification Opportunities for CTBC Financial and Vietnam Manufacturing

-0.51

Correlation Coefficient

CTBC Financial  Vietnam Manufacturing

Excellent diversification

The 3 months correlation between CTBC and Vietnam is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Vietnam Manufacturing and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Manufacturing and 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 Vietnam Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Manufacturing and has no effect on the direction of CTBC Financial i.e., CTBC Financial and Vietnam Manufacturing go up and down completely randomly.

Pair Corralation between CTBC Financial and Vietnam Manufacturing

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 1.05 times more return on investment than Vietnam Manufacturing. However, CTBC Financial is 1.05 times more volatile than Vietnam Manufacturing and. It trades about 0.25 of its potential returns per unit of risk. Vietnam Manufacturing and is currently generating about -0.04 per unit of risk. If you would invest  3,205  in CTBC Financial Holding on September 4, 2024 and sell it today you would earn a total of  655.00  from holding CTBC Financial Holding or generate 20.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

CTBC Financial Holding  vs.  Vietnam Manufacturing and

CTBC Financial Holding

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 19 (%) 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.

Vietnam Manufacturing and

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CTBC Financial and Vietnam Manufacturing

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

The idea behind CTBC Financial Holding and Vietnam Manufacturing and 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.