Correlation Between Fubon NASDAQ and Fubon Hang

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

By analyzing existing cross correlation between Fubon NASDAQ 100 Index and Fubon Hang Seng, you can compare the effects of market volatilities on Fubon NASDAQ 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 Fubon NASDAQ with a short position of Fubon Hang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon NASDAQ and Fubon Hang.

Diversification Opportunities for Fubon NASDAQ and Fubon Hang

-0.4

Correlation Coefficient

Fubon NASDAQ  Fubon Hang

Very good diversification

The 3 months correlation between Fubon and Fubon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fubon NASDAQ 100 Index 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 Fubon NASDAQ 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 Fubon NASDAQ 100 Index 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 Fubon NASDAQ i.e., Fubon NASDAQ and Fubon Hang go up and down completely randomly.

Pair Corralation between Fubon NASDAQ and Fubon Hang

Assuming the 90 days trading horizon Fubon NASDAQ 100 Index is expected to generate 0.39 times more return on investment than Fubon Hang. However, Fubon NASDAQ 100 Index is 2.56 times less risky than Fubon Hang. It trades about 0.22 of its potential returns per unit of risk. Fubon Hang Seng is currently generating about -0.11 per unit of risk. If you would invest  7,995  in Fubon NASDAQ 100 Index on September 17, 2024 and sell it today you would earn a total of  1,085  from holding Fubon NASDAQ 100 Index or generate 13.57% return on investment over 90 days.

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

Fubon NASDAQ 100 Index  vs.  Fubon Hang Seng

Fubon NASDAQ 100

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon NASDAQ 100 Index are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fubon NASDAQ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fubon Hang Seng

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon Hang Seng has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Fubon NASDAQ and Fubon Hang

The main advantage of trading using opposite Fubon NASDAQ and Fubon Hang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon NASDAQ 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 Fubon NASDAQ 100 Index 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.