Correlation Between Fuh Hwa and Fubon FTSE

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

Diversification Opportunities for Fuh Hwa and Fubon FTSE

0.62

Correlation Coefficient

Fuh Hwa  Fubon FTSE

Poor diversification

The 3 months correlation between Fuh and Fubon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fuh Hwa Emerging and Fubon FTSE Vietnam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon FTSE Vietnam 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 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 Vietnam has no effect on the direction of Fuh Hwa i.e., Fuh Hwa and Fubon FTSE go up and down completely randomly.

Pair Corralation between Fuh Hwa and Fubon FTSE

Assuming the 90 days trading horizon Fuh Hwa is expected to generate 3.53 times less return on investment than Fubon FTSE. But when comparing it to its historical volatility, Fuh Hwa Emerging is 1.28 times less risky than Fubon FTSE. It trades about 0.07 of its potential returns per unit of risk. Fubon FTSE Vietnam is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Fubon FTSE Vietnam on December 27, 2024 and sell it today you would earn a total of  86.00  from holding Fubon FTSE Vietnam or generate 7.34% return on investment over 90 days.

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

Fuh Hwa Emerging  vs.  Fubon FTSE Vietnam

Fuh Hwa Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fuh Hwa Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fuh Hwa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Fubon FTSE Vietnam

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon FTSE Vietnam are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fubon FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fuh Hwa and Fubon FTSE

The main advantage of trading using opposite Fuh Hwa and Fubon FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fuh Hwa 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 Fuh Hwa Emerging and Fubon FTSE Vietnam 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.