Correlation Between Fubon Hang and Fubon SP

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

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

Diversification Opportunities for Fubon Hang and Fubon SP

-0.09

Correlation Coefficient

Fubon Hang  Fubon SP

Good diversification

The 3 months correlation between Fubon and Fubon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Hang Seng and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred and Fubon Hang 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 Hang Seng are associated (or correlated) with Fubon SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Fubon Hang i.e., Fubon Hang and Fubon SP go up and down completely randomly.

Pair Corralation between Fubon Hang and Fubon SP

Assuming the 90 days trading horizon Fubon Hang Seng is expected to under-perform the Fubon SP. In addition to that, Fubon Hang is 3.62 times more volatile than Fubon SP Preferred. It trades about -0.07 of its total potential returns per unit of risk. Fubon SP Preferred is currently generating about -0.11 per unit of volatility. If you would invest  1,641  in Fubon SP Preferred on September 17, 2024 and sell it today you would lose (15.00) from holding Fubon SP Preferred or give up 0.91% of portfolio value over 90 days.

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

Fubon Hang Seng  vs.  Fubon SP Preferred

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.

Fubon SP Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon SP Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fubon Hang and Fubon SP

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

The idea behind Fubon Hang Seng and Fubon SP Preferred 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.