Correlation Between Fubon 1 and Fubon Hang

Can any of the company-specific risk be diversified away by investing in both Fubon 1 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 1 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 1 3 Years and Fubon Hang Seng, you can compare the effects of market volatilities on Fubon 1 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 1 with a short position of Fubon Hang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon 1 and Fubon Hang.

Diversification Opportunities for Fubon 1 and Fubon Hang

0.03

Correlation Coefficient

Fubon 1  Fubon Hang

Significant diversification

The 3 months correlation between Fubon and Fubon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fubon 1 3 Years 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 1 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 1 3 Years 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 1 i.e., Fubon 1 and Fubon Hang go up and down completely randomly.

Pair Corralation between Fubon 1 and Fubon Hang

Assuming the 90 days trading horizon Fubon 1 3 Years is expected to generate 0.12 times more return on investment than Fubon Hang. However, Fubon 1 3 Years is 8.48 times less risky than Fubon Hang. It trades about 0.09 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  4,153  in Fubon 1 3 Years on September 17, 2024 and sell it today you would earn a total of  62.00  from holding Fubon 1 3 Years or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Fubon 1 3 Years  vs.  Fubon Hang Seng

Fubon 1 3

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon 1 3 Years are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fubon 1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 1 and Fubon Hang

The main advantage of trading using opposite Fubon 1 and Fubon Hang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fubon 1 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 1 3 Years 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.

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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.