Correlation Between Fubon Hang and Fubon Dow

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

Diversification Opportunities for Fubon Hang and Fubon Dow

-0.8

Correlation Coefficient

Fubon Hang  Fubon Dow

Pay attention - limited upside

The 3 months correlation between Fubon and Fubon is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fubon Hang Seng and Fubon Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon Dow Jones 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon Dow Jones has no effect on the direction of Fubon Hang i.e., Fubon Hang and Fubon Dow go up and down completely randomly.

Pair Corralation between Fubon Hang and Fubon Dow

Assuming the 90 days trading horizon Fubon Hang Seng is expected to under-perform the Fubon Dow. In addition to that, Fubon Hang is 2.11 times more volatile than Fubon Dow Jones. It trades about -0.41 of its total potential returns per unit of risk. Fubon Dow Jones is currently generating about 0.17 per unit of volatility. If you would invest  2,317  in Fubon Dow Jones on December 5, 2024 and sell it today you would earn a total of  63.00  from holding Fubon Dow Jones or generate 2.72% return on investment over 90 days.

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

Fubon Hang Seng  vs.  Fubon Dow Jones

Fubon Hang Seng

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Fubon Dow Jones

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon Dow Jones are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fubon Dow may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fubon Hang and Fubon Dow

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

The idea behind Fubon Hang Seng and Fubon Dow Jones 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.