Correlation Between Fubon SP and Fubon NASDAQ

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

By analyzing existing cross correlation between Fubon SP Preferred and Fubon NASDAQ 100 Index, you can compare the effects of market volatilities on Fubon SP and Fubon NASDAQ 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 SP with a short position of Fubon NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fubon SP and Fubon NASDAQ.

Diversification Opportunities for Fubon SP and Fubon NASDAQ

-0.29

Correlation Coefficient

Fubon SP  Fubon NASDAQ

Very good diversification

The 3 months correlation between Fubon and Fubon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fubon SP Preferred and Fubon NASDAQ 100 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon NASDAQ 100 and Fubon SP 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 SP Preferred are associated (or correlated) with Fubon NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon NASDAQ 100 has no effect on the direction of Fubon SP i.e., Fubon SP and Fubon NASDAQ go up and down completely randomly.

Pair Corralation between Fubon SP and Fubon NASDAQ

Assuming the 90 days trading horizon Fubon SP is expected to generate 1.67 times less return on investment than Fubon NASDAQ. But when comparing it to its historical volatility, Fubon SP Preferred is 1.5 times less risky than Fubon NASDAQ. It trades about 0.01 of its potential returns per unit of risk. Fubon NASDAQ 100 Index is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,930  in Fubon NASDAQ 100 Index on October 20, 2024 and sell it today you would earn a total of  15.00  from holding Fubon NASDAQ 100 Index or generate 0.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Fubon SP Preferred  vs.  Fubon NASDAQ 100 Index

Fubon SP Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon SP Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Fubon NASDAQ 100

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fubon NASDAQ 100 Index are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fubon NASDAQ may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fubon SP and Fubon NASDAQ

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

The idea behind Fubon SP Preferred and Fubon NASDAQ 100 Index 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.