Correlation Between President Chain and CTBC Financial

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

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

Diversification Opportunities for President Chain and CTBC Financial

-0.74

Correlation Coefficient

President Chain  CTBC Financial

Pay attention - limited upside

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

Pair Corralation between President Chain and CTBC Financial

Assuming the 90 days trading horizon President Chain Store is expected to under-perform the CTBC Financial. In addition to that, President Chain is 1.03 times more volatile than CTBC Financial Holding. It trades about -0.11 of its total potential returns per unit of risk. CTBC Financial Holding is currently generating about 0.24 per unit of volatility. If you would invest  3,360  in CTBC Financial Holding on September 17, 2024 and sell it today you would earn a total of  600.00  from holding CTBC Financial Holding or generate 17.86% return on investment over 90 days.

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

President Chain Store  vs.  CTBC Financial Holding

President Chain Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days President Chain Store 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.

CTBC Financial Holding

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 18 (%) 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.

Pair Trading with President Chain and CTBC Financial

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

The idea behind President Chain Store and CTBC Financial Holding 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.