Correlation Between Fuh Hwa and CTBC USD

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

Diversification Opportunities for Fuh Hwa and CTBC USD

0.95

Correlation Coefficient

Fuh Hwa  CTBC USD

Almost no diversification

The 3 months correlation between Fuh and CTBC is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fuh Hwa Emerging and CTBC USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC USD Corporate 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 CTBC USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC USD Corporate has no effect on the direction of Fuh Hwa i.e., Fuh Hwa and CTBC USD go up and down completely randomly.

Pair Corralation between Fuh Hwa and CTBC USD

Assuming the 90 days trading horizon Fuh Hwa is expected to generate 2.16 times less return on investment than CTBC USD. But when comparing it to its historical volatility, Fuh Hwa Emerging is 1.14 times less risky than CTBC USD. It trades about 0.02 of its potential returns per unit of risk. CTBC USD Corporate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,335  in CTBC USD Corporate on September 28, 2024 and sell it today you would earn a total of  173.00  from holding CTBC USD Corporate or generate 5.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.62%
Values	Daily Returns

Fuh Hwa Emerging  vs.  CTBC USD Corporate

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.

CTBC USD Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fuh Hwa and CTBC USD

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

The idea behind Fuh Hwa Emerging and CTBC USD Corporate 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.