Correlation Between Fubon TWSE and Fubon FTSE

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

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

Diversification Opportunities for Fubon TWSE and Fubon FTSE

0.96

Correlation Coefficient

Fubon TWSE  Fubon FTSE

Almost no diversification

The 3 months correlation between Fubon and Fubon is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Fubon FTSE TWSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon FTSE TWSE and Fubon TWSE 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 TWSE Corporate are associated (or correlated) with Fubon FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon FTSE TWSE has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Fubon FTSE go up and down completely randomly.

Pair Corralation between Fubon TWSE and Fubon FTSE

Assuming the 90 days trading horizon Fubon TWSE is expected to generate 1.57 times less return on investment than Fubon FTSE. But when comparing it to its historical volatility, Fubon TWSE Corporate is 1.06 times less risky than Fubon FTSE. It trades about 0.04 of its potential returns per unit of risk. Fubon FTSE TWSE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,945  in Fubon FTSE TWSE on October 8, 2024 and sell it today you would earn a total of  405.00  from holding Fubon FTSE TWSE or generate 3.7% return on investment over 90 days.

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

Fubon TWSE Corporate  vs.  Fubon FTSE TWSE

Fubon TWSE Corporate

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon TWSE Corporate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fubon TWSE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Fubon FTSE TWSE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon FTSE TWSE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fubon FTSE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fubon TWSE and Fubon FTSE

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

The idea behind Fubon TWSE Corporate and Fubon FTSE TWSE 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.