Correlation Between Fubon TWSE and Yuanta Daily

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

Diversification Opportunities for Fubon TWSE and Yuanta Daily

0.53

Correlation Coefficient

Fubon TWSE  Yuanta Daily

Very weak diversification

The 3 months correlation between Fubon and Yuanta is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fubon TWSE Corporate and Yuanta Daily CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta Daily CSI 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 Yuanta Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta Daily CSI has no effect on the direction of Fubon TWSE i.e., Fubon TWSE and Yuanta Daily go up and down completely randomly.

Pair Corralation between Fubon TWSE and Yuanta Daily

Assuming the 90 days trading horizon Fubon TWSE is expected to generate 5.7 times less return on investment than Yuanta Daily. But when comparing it to its historical volatility, Fubon TWSE Corporate is 4.76 times less risky than Yuanta Daily. It trades about 0.11 of its potential returns per unit of risk. Yuanta Daily CSI is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Yuanta Daily CSI on September 17, 2024 and sell it today you would earn a total of  477.00  from holding Yuanta Daily CSI or generate 41.59% return on investment over 90 days.

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

Fubon TWSE Corporate  vs.  Yuanta Daily CSI

Fubon TWSE Corporate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon TWSE Corporate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fubon TWSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Yuanta Daily CSI

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuanta Daily CSI are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Yuanta Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fubon TWSE and Yuanta Daily

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

The idea behind Fubon TWSE Corporate and Yuanta Daily CSI 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.