Correlation Between Yuanta Daily and Fubon Hang

Can any of the company-specific risk be diversified away by investing in both Yuanta Daily and Fubon Hang 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 Yuanta Daily and Fubon Hang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Yuanta Daily CSI and Fubon Hang Seng, you can compare the effects of market volatilities on Yuanta Daily and Fubon Hang 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 Yuanta Daily with a short position of Fubon Hang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yuanta Daily and Fubon Hang.

Diversification Opportunities for Yuanta Daily and Fubon Hang

0.15

Correlation Coefficient

Yuanta Daily  Fubon Hang

Average diversification

The 3 months correlation between Yuanta and Fubon is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Yuanta Daily CSI and Fubon Hang Seng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Hang Seng and Yuanta Daily 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 Yuanta Daily CSI are associated (or correlated) with Fubon Hang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Hang Seng has no effect on the direction of Yuanta Daily i.e., Yuanta Daily and Fubon Hang go up and down completely randomly.

Pair Corralation between Yuanta Daily and Fubon Hang

Assuming the 90 days trading horizon Yuanta Daily is expected to generate 7.12 times less return on investment than Fubon Hang. But when comparing it to its historical volatility, Yuanta Daily CSI is 1.69 times less risky than Fubon Hang. It trades about 0.09 of its potential returns per unit of risk. Fubon Hang Seng is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  845.00  in Fubon Hang Seng on December 5, 2024 and sell it today you would earn a total of  244.00  from holding Fubon Hang Seng or generate 28.88% return on investment over 90 days.

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

Yuanta Daily CSI  vs.  Fubon Hang Seng

Yuanta Daily CSI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yuanta Daily CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Yuanta Daily is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fubon Hang Seng

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Hang Seng are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fubon Hang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yuanta Daily and Fubon Hang

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

The idea behind Yuanta Daily CSI and Fubon Hang Seng 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.