Correlation Between CTBC Financial and Parade Technologies

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

Diversification Opportunities for CTBC Financial and Parade Technologies

0.86

Correlation Coefficient

CTBC Financial  Parade Technologies

Very poor diversification

The 3 months correlation between CTBC and Parade is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Parade Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parade Technologies 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 Parade Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parade Technologies has no effect on the direction of CTBC Financial i.e., CTBC Financial and Parade Technologies go up and down completely randomly.

Pair Corralation between CTBC Financial and Parade Technologies

Assuming the 90 days trading horizon CTBC Financial is expected to generate 1.1 times less return on investment than Parade Technologies. But when comparing it to its historical volatility, CTBC Financial Holding is 1.27 times less risky than Parade Technologies. It trades about 0.18 of its potential returns per unit of risk. Parade Technologies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  48,900  in Parade Technologies on April 24, 2025 and sell it today you would earn a total of  9,400  from holding Parade Technologies or generate 19.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

CTBC Financial Holding  vs.  Parade Technologies

CTBC Financial Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 14 (%) 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.

Parade Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parade Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Parade Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CTBC Financial and Parade Technologies

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

The idea behind CTBC Financial Holding and Parade Technologies 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.