Correlation Between CTBC Financial and Tex Ray

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

Diversification Opportunities for CTBC Financial and Tex Ray

-0.34

Correlation Coefficient

CTBC Financial  Tex Ray

Very good diversification

The 3 months correlation between CTBC and Tex is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Tex Ray Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tex Ray Industrial 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 Tex Ray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tex Ray Industrial has no effect on the direction of CTBC Financial i.e., CTBC Financial and Tex Ray go up and down completely randomly.

Pair Corralation between CTBC Financial and Tex Ray

Assuming the 90 days trading horizon CTBC Financial Holding is expected to under-perform the Tex Ray. But the stock apears to be less risky and, when comparing its historical volatility, CTBC Financial Holding is 8.58 times less risky than Tex Ray. The stock trades about -0.04 of its potential returns per unit of risk. The Tex Ray Industrial Co is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Tex Ray Industrial Co on January 28, 2024 and sell it today you would earn a total of  115.00  from holding Tex Ray Industrial Co or generate 10.55% return on investment over 90 days.

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

CTBC Financial Holding  vs.  Tex Ray Industrial Co

CTBC Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC Financial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, CTBC Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Tex Ray Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tex Ray Industrial Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tex Ray may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with CTBC Financial and Tex Ray

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

The idea behind CTBC Financial Holding and Tex Ray Industrial 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.