Correlation Between Fuh Hwa and Yuanta STOXX

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

By analyzing existing cross correlation between Fuh Hwa Emerging and Yuanta STOXX Global, you can compare the effects of market volatilities on Fuh Hwa and Yuanta STOXX 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 Fuh Hwa with a short position of Yuanta STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuh Hwa and Yuanta STOXX.

Diversification Opportunities for Fuh Hwa and Yuanta STOXX

-0.26

Correlation Coefficient

Fuh Hwa  Yuanta STOXX

Very good diversification

The 3 months correlation between Fuh and Yuanta is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fuh Hwa Emerging and Yuanta STOXX Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuanta STOXX Global and Fuh Hwa 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 Fuh Hwa Emerging are associated (or correlated) with Yuanta STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuanta STOXX Global has no effect on the direction of Fuh Hwa i.e., Fuh Hwa and Yuanta STOXX go up and down completely randomly.

Pair Corralation between Fuh Hwa and Yuanta STOXX

Assuming the 90 days trading horizon Fuh Hwa Emerging is expected to under-perform the Yuanta STOXX. But the etf apears to be less risky and, when comparing its historical volatility, Fuh Hwa Emerging is 2.48 times less risky than Yuanta STOXX. The etf trades about -0.16 of its potential returns per unit of risk. The Yuanta STOXX Global is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  6,305  in Yuanta STOXX Global on October 7, 2024 and sell it today you would earn a total of  685.00  from holding Yuanta STOXX Global or generate 10.86% return on investment over 90 days.

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

Fuh Hwa Emerging  vs.  Yuanta STOXX Global

Fuh Hwa Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuh Hwa Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fuh Hwa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Yuanta STOXX Global

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Fuh Hwa and Yuanta STOXX

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

The idea behind Fuh Hwa Emerging and Yuanta STOXX Global 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.